Private Placement Sales

May 2014Articles Broker-Dealer Regulation

This material is based on the authors’ chapter, Private Placement Sales, which is published as part of Broker-Dealer Regulation by Practising Law Institute, and is available at 1-800-260-4754; www.pli.edu © The Practising Law Institute. Reproduced with permission. All rights reserved.

Over many years, numerous entities have used the capital raising strategy known as a private placement through the services of a securities broker-dealer. Numerous compliance-related issues arise with such private placements for both the issuers and broker-dealers who offer them to the investors. Although every issues is not covered in this brief chapter, we attempt to provide a broad overview to sensitize the reader to the concerns broker-dealers and their compliance staffs may face when firms consider raising capital for an issuer though a private placement.

Initially, we discuss the current statutory and regulatory structure for private placements, a system primarily based in exemptions and exceptions to provisions of the Securities Act of 1933 (the Securities Act), the Securities Exchange Act of 1934 (the Exchange Act) and the Investment Company Act of 1940. Next, we acknowledge certain practical aspects in the regulation of securities broker-dealers with particular emphasis on considerations that must be measured prior to raising capital for issuers through a private placement. Finally, “real world” case studies will demonstrate some pitfalls to avoid.

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