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PRIVATE PLACEMENTS Larry C. Tomlin, Krieg DeVault LLP Jarod Brown, Attorney at Law

Private Placements

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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. - PowerPoint PPT Presentation

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Page 1: Private Placements

PRIVATE PLACEMENTSLarry C. Tomlin, Krieg DeVault LLPJarod Brown, Attorney at Law

Page 2: Private Placements

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.

Page 3: Private Placements

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)

Page 4: Private Placements

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

Page 5: Private Placements

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

Page 6: Private Placements

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

Page 7: Private Placements

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

Page 8: Private Placements

Mid Offering Issues

Structuring the offering All accredited vs. non-accredited Min/Max

Rule 15c2-4 Rule 10b-9

Page 9: Private Placements

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

Page 10: Private Placements

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.

Page 11: Private Placements

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)

Page 12: Private Placements

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…