The following reviews the principal regulations which governs Private Placement offerings of securities and describes allowable investor participants.
  • Private Placements are Offerings of Securities wherein the transaction and the related securities do not follow the public registration requirements of the Securities Exchange Commission (“SEC”).  They are traditionally offered in a non-public manner (i.e., without public advertising) and sold only to larger Investors.  The Federal law authorizing Private Placements is Section 4(a)(2) of the Securities Act of 1933.

 

 

 

 

  • Private Placements are subject to all federal and state regulations regarding Securities issuance, including those relating to misrepresentation and fraud.

 

  • Regulation D is a regulation of the SEC originally adopted in 1980 which contains specific rules for the proper conduct of a Private Placement in the United States (also known as safe harbor guidelines). Following the Rules within Regulation D is strongly recommended.

 

  • Specific guidelines for larger Offerings of securities which are sold to investors across state lines are found within Regulation D in Rules 506(b) and Rule 506(c).

 

  • Rule 506(b) offerings are non-public (no advertising permitted), wherein an unlimited amount of securities may be offered discreetly (i.e., by direct communication with no public advertising of the offering) to an unlimited number of Accredited Investors and up to 35 non-Accredited Investors (also see “Regulation D, Rule 506(b) Private Placements”).

 

  • Rule 506(b) Offerings, while providing some flexibility with regard to participation by non-Accredited Investors, are typically limited to Accredited Investors.

 

For a discussion of certain risks associated with Private Placements, please read Private Placement Investment Considerations.