How Do Private And Public Placements Differ?

Private placements function similarly to public offerings but are extended to a select few investors. Under the federal securities laws, any offer or sale of a security must either be registered with the Securities and Exchange Commission (SEC) or meet an exemption. Regulation D under the Securities Act provides exemptions from the registration requirements, allowing some companies to offer and sell their securities without having to register the offering with the SEC.

Companies that comply with the requirements of Regulation D do not have to register their offering of securities with the SEC, but they must file what is known as a "Form D" electronically with the SEC after they first sell their securities. Form D is a brief notice that includes the names and addresses of the company's promoters, executive officers and directors, and some details about the offering, but contains little other information about the company. You can access the SEC's EDGAR database to determine whether the company has filed a Form D. Even if a company takes advantage of an exemption from registration, it should take care to provide sufficient information to investors to avoid violating the anti-fraud provisions of the securities laws. This means that any information a company provides to investors must be free from false or misleading statements. Similarly, a company should not exclude any information if the omission makes what is provided to investors false or misleading. We typically recommend that companies provide each investor with a private placement memorandum that contains the various categories of disclosure information suggested by the SEC in Regulation S-K. There also are various elements to the Rule 506 transaction exemption that must be satisfied by each company relying on such transaction exemption found therein.

Blue Sky Filings/Compliance

In connection with engaging in a private placement of securities, issuer companies must make what are known as "Blue Sky" filings in each state where their securities are sold. In a typical Rule 506 offering, the filings in each state include a cover letter with information prescribed by each state (name of issuer, offering exemption claimed, date of first sale and acknowledgment of filing fee payment), a copy of the Form D filed with the SEC and a check to cover the filing fee for that particular state. Some filings must now occur through the North America Securities Administrators Association portal. In the event a Rule 506 offering format is not utilized, the filings in each state can be much more complex and extensive.

A skilled securities lawyer should be an essential part of any securities offering proposed by issuer companies, whether the offering is public or private.

The Role Of A Securities Attorney

At the Law Office of Clifford J. Hunt, P.A., we focus our full attention on business regulation and securities regulations so we can properly serve your needs. Our lawyers will discuss your securities offerings with you and assist with the preparation of a private placement memorandum and associated documents to facilitate compliance with state and federal securities laws.

Our firm uniquely offers the experience and quality service that clients can expect from a large firm while remaining a small, personal firm in which clients speak directly to their attorney.

Put Professional Experience On Your Side

Even private securities offerings are subject to state and federal securities regulation. As securities law is not only one of the most regulated areas of law, but also a complicated area, we encourage you to seek experienced help.

You can email us or call 800-878-5829 to schedule a consultation. We are in the Tampa Bay area of Florida (Seminole) and serve clients throughout Florida, nationwide and abroad.