Regulation D Disclosure Requirements

Why is the Regulation D term “All Material Information” the most important term to comply?

An Offering is the private raising of capital by selling shares or debt to individuals in private transactions. Federal Securities Laws require that you provide potential investors with all material information. All material information is any information that is needed to fully inform potential investors of their decision to invest in your company. The law doesn't define specifically what you need to disclose other than to say if it is material it must be disclosed. The Offering Memorandum is your proof that you disclosed all material information to the investor. The signed Subscription Agreement that the investor signs and returns to you with their investment check acts as your receipt and proof that he received the Offering Memorandum. The offering memorandum is also called a Private Placement Offering Memorandum. A Private Placement Memorandum must be given to any prospective investor who is not an immediate family member - mother, father, sister, brother.

What are your disclosure obligations under 10B-5 of the Act?

No matter what the disclosure requirements, no matter what level of sophistication the investor you are never relieved of the legal responsibilities of the full and accurate disclosure. Always the onus of proof is on you the issuer to prove that all material disclosures were provided the investor. That's why the offering memorandum is so important because it's a single source of proof that you provided the investor full disclosure. I cannot stress strongly enough that securities fraud liability can make you personally liable for the entire amount of the stock sold, attorney fees, and the lawsuit costs under certain state statutes. Additionally, either federal or state securities regulators can also bring criminal actions against the company and individual selling stock.

Understand the meanings of “truth of statements” and “no material omissions.”

If you don't know for sure that a statement is true, don't say it at all. Don't quote sources that are not true, don't misquote, don't quote out of context. Don't misrepresent agreements or partnerships that are not signed. Example if you're working on a big order or contract and it is eminent you cannot represent it as a done deal. Don't promise or suggest a specific rate of return or future price per share or future company valuation or specific exit strategy. Don't promise an IPO or merger. Remember any deliberate incorrect statements can be the basis of a securities fraud lawsuit under 10 B-5

Private Placement Memorandum Explained. Click Here

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Shields Capital Partners

3606 Enterprise Avenue

Naples, FL 34104

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