Private & Public Placements
 Private Placements:
A private placement is a direct offering of securities to a limited number of sophisticated institutional investors, called accredited investors, as defined in the Securities & Exchange Commission (SEC) requirements for a Regulation D offering (usually called “Reg D”).
An accredited investor is currently defined in "Reg
D" as any natural person whose individual net worth, or joint
net worth with that person's spouse, at the time of his
purchase exceeds $1,000,000; or any natural person who had an
individual income in excess of $200,000 in each of the two
most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current
year. There are others included in the definition as well,
including financial institutions and institutional investors,
etc.
Most securities issuances in the United States must be registered with the Securities and Exchange Commission (SEC). Registration documents include detailed disclosure, financial statements, historical information and third party audits that take time to assemble. The process requires many hours of assistance by attorneys and accountants, and the SEC review can last from 20 to 60 days or more. Registration alone can cost thousands of dollars even before the offering makes any money. A private placement, however, is EXEMPT from federal registration under the Securities Act of 1933. However, those exemptions were rather vague, and therefore potentially risky. So in 1982, the SEC adopted Regulation D, which set forth clearly the rules for exemptions.
To meet the requirement of Regulation D (or the requirements of Section 4(2) of the 1933 Act (the private placement exemption), the issuer is required to make extensive disclosures regarding the nature, character and risk factors related to an offering. TIC sponsors provide and issue the Private Placement Memorandum (PPM) to the investor or potential investor. The PPM is the structured document with all pertinent information, disclosures and data about the specific TIC property. This is to assist the investor in making an informed decision.
While companies using a Reg D exemption do not have to register their securities, they must file what’s known as a "Form D" after they first sell the securities. Form D is a brief notice that includes the names and addresses of the company’s owners and stock promoters, but contains little other information about the company. The SEC emphasizes that while the security is not ‘registered’ and follows the rules set forth in Reg D, the offerings are not exempt from the anti-fraud or civil liability provisions of federal securities law.
This is neither an offer to sell nor a
solicitation to buy a security. Such an offer can only
be made by means of a Private Placement Memorandum.
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