Private Placement Attorney - Brief Overview of Rule 504
Monday, June 8, 2009 at 4:43PM One of the exemptions from the federal securities laws regarding the registration of securities offerings comes in Rule 504. Rule 504 provides an exemption for the offer and sale of up to $1MM of securities in a single twelve month period. In general, an issuer may not use public solicitation or advertising to market the securities. Purchasers must receive restricted securities, meaning that the securities may not be sold without either registration or an applicable exemption. Unlike some other exemptions, Rule 504 allows for a private sale without any specific disclosure requirements, although care should be taken to provide sufficient information to investors to avoid violating the anti-fraud provisions of the federal securities laws - as I mentioned in an earlier post - disclose, disclose disclose. Make sure there are not only no false statements, but no misleading statements either, and no omissions that might make what you have disclosed misleading.
As always, make sure you get the advice of a securities attorney with private placement experience. There are lots of complicated regulatory requirements to comply with, both on the state and federal level. A private placement attorney can help you navigate the regulations and to draft your private placement memorandum.
Reader Comments (1)
I always advise clients to have investors sign a PPM, subscription agreement and investor questionaire. People do not sue when they make money but always when they suffer a loss or they think they suffered a loss. A PPM and related documents not only serve as proper disclosure for the offering but as written proof that disclosures were in fact made and the investor was made aware of the risk and all material facts surrounding the offering. This written acknowledgement by the investor is very useful in court when memories are fuzzy.