Presentation on theme: "PRIVATE PLACEMENTS Larry C. Tomlin, Krieg DeVault LLP Jarod Brown, Attorney at Law."— Presentation transcript:
PRIVATE PLACEMENTS Larry C. Tomlin, Krieg DeVault LLP Jarod Brown, Attorney at Law
Introduction Three truths about every offering: the offering is registered; the offering, the security or the issuer is exempt from registration; or the offering is illegal.
Introduction, cont’d Overview of Common Exemptions Section 4(2) of the Securities Act of 1933 Rule 506 (Safe Harbor) Section 3(b) of the Securities Act of 1933 Rule 504 Rule 505 Regulation A Rule 701 Section 4(5) of the Securities Act of 1933 Section 3(a)(11) of the Securities Act of 1933 Rule 147 (Safe Harbor)
Introduction, cont’d Considerations for choosing an appropriate exemption Threshold question – Public or Private Amount to be raised Nature of offerees Accredited Resident in one state Existing shareholders Employees of issuer Nature of Issuer Development stage company Serial issuer
Regulation D – Brief Overview Exemptions Rule 504 Up to $1,000,000 No “Blank Check” Companies Generally Restricted Securities, unless: Registered State Exemptions General Solicitations Permitted to Accredited Investors Rule 505 Up to $5,000,000 Unlimited accredited, up to 35 non-accredited Restricted Securities, must inform (6 months) No General Solicitation Differing Disclosure Standards
Regulation D – Brief Overview, cont’d Exemptions Rule 506 “Safe Harbor” Unlimited Amount Unlimited accredited, up to 35 non-accredited Non-accredited must be “sophisticated” Differing Disclosure Standards Company must be available to answer questions Financial Statements Restricted Securities, 1 year Practice Point – Small Business Startups
Early Offering Issues Finders Don’t use them Engagement Letters with Placement Agent Best Efforts Fees Services Due Diligence Blue Sky To file, or not to file
Mid Offering Issues Structuring the offering All accredited vs. non-accredited Min/Max Rule 15c2-4 Rule 10b-9
Mid Offering Issues, cont’d Use of a private placement memorandum Accredited vs. non-accredited Anti-fraud Contents of a private placement memorandum Accredited vs. non-accredited Rule 502
Mid Offering Issues, cont’d Issues for consideration A securities disclosure document, not a sales document Risk factors Bespeaks Caution Doctrine A judicially created doctrine that renders forward-looking statements non- actionable under the securities laws if such statements are accompanied by sufficient cautionary language Private Securities Litigation Reform Act of 1995 an issuer that, at the time that the statement is made, is subject to the reporting requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934; a person acting on behalf of such issuer; an outside reviewer retained by such issuer making a statement on behalf of such issuer; o an underwriter, with respect to information provided by such issuer or information derived from information provided by the issuer.
Post Offering Issues Form D EDGAR Access Codes Rule 503 No later than 15 calendar days after the first sale of securities in the offering State Requirements Resale Restrictions Rule 144 Rule 4(1-1/2)
Regulatory Updates JOBS Act Regulation A Increased from $5 Million to $50 Million General Solicitation Mandates SEC revise Rule 506 to permit general solicitation for “accredited only” private offerings Crowdfunding Many restrictions No regulations yet, stay tuned…