You Gotta Be A Big Boy To Play In The Private Investment Transaction Game
“Big Boy Letters” are usually used to identify that the buyer in a transaction has made its own independent assessment of certain risks involved and that certain information has not been disclosed to the buyer by the seller. In particular, this means that a party is not relying upon certain representations or the lack of representations.
The critical step in these letters is considering the application of these non-reliance provisions are received by the courts and the SEC. In particular, the SEC has taken the position that such a letter will not foreclose an insider trading liability case under a misappropriation theory However, courts and private litigants could effectively eliminate or at least limit the potential liability from these letters.
Essentially, the use of these letters is somewhat uncertain depending upon the context. Nonetheless, these letters are certainly not a complete "get out of jail free" card, and will depend upon the facts and circumstances of each situation.