Transcript Private Placements

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
 Serial
issuer
stage company
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
 Rule
502
vs. non-accredited
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 nonactionable 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
 Increased
 General
A
from $5 Million to $50 Million
Solicitation
 Mandates
SEC revise Rule 506 to permit general solicitation
for “accredited only” private offerings
 Crowdfunding
 Many
restrictions
 No regulations yet, stay tuned…