When to Use PPMs

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The Private Placement Memorandum (PPM) is the disclosure document used in private securities offerings, providing to prospective investors detailed information about the company’s business plan, terms of the offering, risk factors, management, financial history and/or projections, etc., to enable the investors to make an informed decision on whether to participate in the offering.  For Regulation D offerings, Rule 502 requires that a PPM be provided to any non-accredited investor and goes on to recommend that the same PPM also be provided to the accredited investors.  Therefore, in an offering that is made solely to accredited investors, as is often the case, a PPM is not required.  So the question is whether, in such cases, a PPM should nevertheless be prepared and provided.

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Interesting Reads of the Week

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Some interesting legal reads for the week of February 3, 2014:

  • The SEC issued transitional guidance for Rule 506 offerings commenced before the effective date of the new rules permitting general solicitation.  Here is a summary from Securities News Watch.

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Interesting Reads of the Week

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Starting now, I’m introducing a new (hopefully weekly) feature of this blog, where I provide a few links to some outside articles and blog posts that I found interesting.  Here goes:

  • Announcements of acquisitions of public companies lead to near-automatic shareholder lawsuits.
  • An account of (apparently) the first Regulation D offering using general solicitation under the new rules.
  • The SEC issued a report mandated by the JOBS Act on disclosure requirements under Regulation S-K, which applies to public company filings under the Securities Act of 1933 and Securities Exchange Act of 1934.
  • A useful reminder that Form Ds, the form filed to report private offerings conducted under Regulation D, are publicly available when filed with the SEC.

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Further Thoughts on JOBS Act and Investor Fraud

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Over the New Year, I saw the new Leonardo DiCaprio/Martin Scorsese film, “The Wolf of Wall Street,” which told the apparently mostly-not-embellished true story of boiler room scammer Jordan Belfort.  In addition to setting a record for use of the f-word in a film, this movie was the most relevant to what I do for a living since “The Social Network” improbably addressed the issue of dilution of startup founders.

JOBS Acts and Crowdfunding

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Use of Finders in Securities Offerings

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In private securities offerings where the company does not engage an investment banker who is a registered broker-dealer to market the offering to investors, companies will often seek the assistance of so-called “finders,” who are not registered as broker-dealers, to connect the company with potential investors.  These finders are often paid a pre-determined percentage of the amount ultimately raised by the company from the investors introduced by the finder.  Though this practice is extremely common, this area of the law is very much a gray area, and there are significant risks to both the finder and the company that should be considered.

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About the Practice

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Mr. Abramowitz can assist in a wide variety of transactional matters, including:

  • Entity formation and maintenance (corporations, LLCs, etc.) including preparation/negotiation of multiple-member LLC operating agreements
  • Private placements and public offerings of securities, including venture capital financings, representing issuers or investors, including PPM review, subscription documentation, blue sky filings, etc.; Regulation CF and Rule 506(c) crowdfunding offerings
  • Public company matters, including compliance with ongoing SEC disclosure requirements (Forms 10-K, 10-Q, 8-K, proxy statements, Form 4s, Rule 144, etc.) and disclosure obligations relating to securities offerings (PIPEs, equity line transactions, Form S-1 and Form S-3 registrations, etc.)
  • Mergers and acquisitions and joint ventures
  • Trademark and copyright registrations and licenses
  • Other common transactional matters, including:
    • commercial agreements
    • non-disclosure agreements
    • settlement agreements
    • loan and security agreements
    • employment/consulting agreements
    • stock option/restricted stock arrangements

Fees

Fee arrangements are discussed in detail with clients at the beginning of each matter and agreed upon prior to commencement of work. Alternative billing arrangements such as project-based fixed fees and monthly retainer arrangements may be available for matters with a reasonably predictable time commitment.

For matters billed on a traditional, hourly basis, the rate is reasonable for New York corporate attorneys with similar background and experience.

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