Private Placement Memorandum

Private Placement Memorandum

A private placement of securities involves selling securities without registering the securities with the SEC.

Regulation D is one registration exemption offered to issuers by The Securities Act of 1933 as amended. The Electronic Code of Federal Regulations (e-CFR) outlines the requirements for using the Regulation D exemption and the information that must be provided to investors.

A Private Placement Memorandum ("PPM") is a legal document, given to prospective investors when the issuer is seeking capital and issuing a security, that describes and explains exactly why and how the offering complies with the SEC's Regulation D Offering Exemption. Unlike a prospectus, a PPM is used in “private offering of securities” when the securities are not registered under applicable federal or state law.

The PPM describes the company selling the securities, the terms of the offering, and the risks of the investment, amongst other things. The disclosures included in the PPM vary depending on which exemption from registration is being used, the target investors, the complexity of the terms of the offering, the issuer's finances and other important facts.

Private Placement Memorandum

Subscription Agreement

The Subscription Agreement, like the PPM, is a legal document.

The Subscription Agreement is somewhat similar to a purchase agreement: it is a promise by the issuer to sell a specific number and type of security. It is also a promise by an investor, sometimes referred to as the subscriber, to purchase a specific number of securities at a specified price from the issuer.

In addition to functioning as a type of purchase agreement, the Subscription Agreement can also help the issuer qualify potential subscribers/investors in determining whether or not the potential investor meets the definition of and qualifies as an accredited investor. This qualification is especially important if the issuer plans to use Rule 506(b) or Rule 506(c) of Regulation D.

July 2020