Series 82: Private Placement Documents

Taken from our Series 82 Online Guide Private Placement Documents

The issuer of the private placement, along with their attorneys, will draft a private placement memorandum (PPM). A PPM is a long, detailed document (50+ pages) similar to a prospectus. The PPM contains a description of the issuer’s business, its capital and management structure, its relevant financial information, a description of the securities being offered, and the terms of the offering. A PPM is not required, but it is a recommended practice.

While the PPM is being prepared, the placement agent draws up a target list of potential investors. Only known investors will be contacted. No public advertising or cold calling is allowed unless the private placement will be carried out under Rule 506(c). Investors must be properly screened and tailored to the type and size of the offering. This approach is necessary for a private placement to be exempt from SEC registration. The agent must attest that the potential investors meet the suitability requirements for the issue. Interestingly, despite being allowed an unlimited number of accredited investors and up to 35 non-accredited investors, in reality, most private placements have fewer than 20 total investors, and the vast majority of private placements have no non-accredited investors.

The placement agent will initially approach prospective investors with a one- or two-page summary of the offering called a teaser. If investors show interest, they will be asked to sign a confidentiality agreement (CA) before being given a copy of the private placement memorandum. The CA is drafted by the placement agent, and it requires inv

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