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Private Placements

Private Placements. Lindsay DeRosia State of Michigan. These views are my own views and not necessarily those of NASAA or the State of Michigan. Regulation D. Regulation D covers 3 federal securities exemptions: Rule 504 Rule 505 Rule 506 17 CFR § 230.501 – 508.

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Private Placements

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  1. Private Placements Lindsay DeRosia State of Michigan NASAA 2010 Investment Adviser Training

  2. These views are my own views and not necessarily those of NASAA or the State of Michigan NASAA 2010 Investment Adviser Training

  3. Regulation D • Regulation D covers 3 federal securities exemptions: • Rule 504 • Rule 505 • Rule 506 • 17 CFR § 230.501 – 508 NASAA 2010 Investment Adviser Training

  4. Regulation D Breakdown • § 230.501: Definitions • § 230.502: General (Integration / Information) • § 230.503: Form D Filing Information • § 230.504 – 506: Specific Exemption Details • § 230.507: Disqualifying Provision • §230.508: Insignificant Deviations NASAA 2010 Investment Adviser Training

  5. Securities Act of 1933 • § 3(b) The Commission may from time to time by its rules and regulations, and subject to such terms and conditions as may be prescribed therein, add any class of securities to the securities exempted as provided in this section, if it finds that the enforcement of this title with respect to such securities is not necessary in the public interest and for the protection of investors by reason of the small amount involved or the limited character of the public offering; but no issue of securities shall be exempted under this subsection where the aggregate amount at which such issue is offered to the public exceeds $5,000,000. NASAA 2010 Investment Adviser Training

  6. Rule 504 • Based on §3(b) of the 33 Act • Offer and sale of up to $1,000,000 in a 12 month period • Can sell to an unlimited number of investors • General solicitation generally not allowed* • Must file a Form D NASAA 2010 Investment Adviser Training

  7. Rule 505 • Based on §3(b) of the 33 Act • Offer and sale of up to $5,000,000 in a 12 month period • Can sell to an unlimited number of accredited investors and up to 35 other persons • No general solicitation or advertising • Must file a Form D NASAA 2010 Investment Adviser Training

  8. Rule 506 • Section 4(2) of the Securities Act exempts from federal registration “transactions by an issuer not involving any public offering.” • Rule 506 was a Rule created to help provide objective standards for when an offering satisfied the 4(2) exemption, and is therefore considered a “safe harbor” for the private offering exemption found in 4(2). NASAA 2010 Investment Adviser Training

  9. Rule 506 • National Securities Markets Improvement Act (“NSMIA”) preempted state regulation of Rule 506 offerings, by classifying them as “federally covered securities.” • States, however, do still retain authority in regards to fraud and notice filing requirements. • There is no offering dollar limit, so it is a popular avenue. NASAA 2010 Investment Adviser Training

  10. Rule 506 • Can raise an unlimited amount of money • Can sell to an unlimited number of accredited investors and up to 35 other purchasers • Cannot use general solicitation • Must file a Form D NASAA 2010 Investment Adviser Training

  11. Accredited Investor • See §230.501(a) for complete list: • Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000 • Any natural person who had an individual income in excess of $200,000 ($300,000 with spouse) NASAA 2010 Investment Adviser Training

  12. PPM • Private Placement Memorandum • Specific disclosure requirements vary amongst the exemptions, but generally a Private Placement Memorandum is utilized • Protects the issuer from future charges of violating the antifraud provisions of federal securities laws. NASAA 2010 Investment Adviser Training

  13. NASAA 2010 Investment Adviser Training

  14. http://www.sec.gov/edgar/searchedgar/companysearch.html NASAA 2010 Investment Adviser Training

  15. For more information • http://www.sec.gov/answers/regd.htm • NASAA • Project Group • Review Checklist NASAA 2010 Investment Adviser Training

  16. Thank you! Have a nice day J NASAA 2010 Investment Adviser Training

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