PPM - Private Placement Memorandum - Explained

What exactly is a PPM - Private Placement Memorandum and why do I need to give it to every investor?

Congress passed a Law to regulate the soliciting and taking of any and all investor money. This law was called The Securities & Exchange Act of 1933. However, compliance with the law was so difficult and expensive that individuals and small companies could not afford to raise capital. To remedy this problem, Congress passed what is known as Regulation D. In Regulation D, Congress said, if you comply with the requirements listed in Regulation D (Reg D) you will be “exempted” from the much more complex and expensive requirements that the SEC Act of 1933 imposes. The key to qualifying for this exemption is you must comply with Reg D. if you violate any of the requirements, you lose the exemption and thus you are in violation of Federal Securities Law.

To begin. Regulation D requires that you must provide each investor with “All Material Information” regarding their investment in your company. The information contained within the PPM – Private Placement Memorandum is the document you give each investor to comply with this Reg D requirement. A business plan is not a PPM, however, the information included within the business plan is included within the PPM. In the case of preparing your own PPM; you would typically copy and paste your business plan into the PPM Template section marked “Copy and Paste business plan here”. Not terribly difficult.

Must you declare in the PPM if the Private Placement is pursuant to Rule 504, 505 or 506 - No

These rules govern compliance requirements and are based upon the amount of capital you intend to raise. They are not PPM specific. In other words, what determines whether a PPM is a 504 or 506 is the amount you indicate within the document. There is no specific wording required in the PPM document itself declaring that this is a Rule 504, 505 or 506 Exemption.

Are PPM’s Industry specific – No

Each PPM will include a 1 line description of what your business does or will do. Examples: We manufacturer widgets. We buy and rehab real estate for resale at a profit. Etc. You also will be providing much more industry specific information within your business plan that also is included in the PPM.

Regulation D also defines investor’s sophistication standards and the standards you must follow to solicit investors. For most, this is the really difficult part. We have a great deal of free information on the website to help you. If you decide to go forward, we then have a number of tools that will provide the basis of your being able to create a game plan.

Do you need an Attorney

For many, the hiring of an attorney is simply unaffordable. If you are not going to hire an attorney; you will find our 4 Audio Seminars on Raising Capital as a very sophisticated learning tool. Most particular the seminar on Profiling and Finding Investors. Audio Seminars - More Information - Click Here

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