Regulation CF refers to the set of rules and forms that will implement securities crowdfunding in the United States. The Securities Exchange Commission (SEC) was required to adopt these rules under the provisions of Title III of the JOBS Act of 2012. The aforementioned legislation provides a unique opportunity for small-scale investors (also known as unaccredited investors) to participating in the equity crowdfunding space with less capital and regulatory restrictions than traditional accredited investors. This monumental change has made it significantly easier for small and microbusinesses to fundraise financial capital

Private Placement Memorandum

A private placement memorandum (PPM) is a legal document provided to prospective investors when selling stock or another security in a business. It is sometimes referred to as an offering memorandum or offering document. A PPM is used in “private” transactions when the securities are not registered under applicable federal or state law, but rather sold using one of the exemptions from registration. The PPM describes the company selling the securities, the terms of the offering, and the risks of the investment, amongst other things. The disclosures included in the PPM vary depending on which exemption from registration is being used, the target investors, and the complexity of the terms of the offering.

While a PPM isn’t required, it is in the best interest of the Entity and its Shareholders to proivde a PPM to all potential investors to make sure they have all the information they need to decide whether to invest. A PPM is NOT to be confused with a business plan, and speaks directly to financial opportunity posed by taking the offering under consideration and subsequently investing. It provides a piece of mind that is essential to maximizing your fundraising opportunities.

Subscription Agreement and Investor Questionnaire

Along with the private placement memorandum, you must prepare two additional documents for investors to sign: a subscription agreement and an investor questionnaire. A subscription agreement is the sales agreement between your business and the investor. It includes:

  • Details of the offer along with the number of shares and the price for each one
  • Representations by the subscriber (buyer) that they have knowledge and experience in financial and business matters and are able to evaluate the risks and merits of the investment
  • Acknowledgements that the subscriber is aware of the investment’s risk and restrictions, and that no government entity has passed on or reviewed the offering

PPM’s and Subscription Agreements are extremely nuanced and complex legal documents. Thomas Legal Center has the knowledge, understanding, and resources necessary to prime your business for unique investment opportunities that can secure you the capital to propel your entrepreneurial endeavors to the next level