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5 Tips For People Buying Their First Ventura County Home In 2020
March 14, 2020
By lerinneillrealtor
People looking to buy their first Ventura County home in 2020 may feel nervous, excited, and scared all at the same time. They may be making their lists of wants and needs, figuring out how much they can afford to spend, and deciding which neighborhoods they want to search in. We’ve rounded up the 5 best tips for people buying their first Ventura County home in 2020 to help give them a little guidance to get started.
EXPLORE FINANCING OPTIONS
There are almost as many different types of mortgages and down payments as there are houses. These days, buying a house doesn’t have to mean automatically putting down 20 percent of the home’s value and then paying a fixed-rate mortgage for 30 years.
For many homebuyers, conventional mortgages are still very attractive because they offer predictable terms and are available from a wide variety of lenders. You also have your choice of fixed-rate or adjustable-rate mortgages, as well as getting 30-year or even 15-year terms. Each choice has its own pros and cons, so be sure to take your time and thoroughly research.
While putting down as much as you can – without breaking the bank – is advisable for lowering your overall monthly payments, people can buy their first Ventura County home with 10 percent, 3 percent, or even no down payment depending on the type of program they sign up for.
There are a wide variety of lending programs and grants out there, and a good mortgage broker can help buyers find the one that meets their needs.
HIRE AN AGENT
An experienced real estate agent knows the local market and knows what to expect in houses being sold around Ventura County. They can be an invaluable resource for anyone looking to buy their first Ventura County house.
The right real estate agent can take a list of likes and dislikes and scour through available listings to find potential properties to show homebuyers. They keep their fingers on the pulse of the housing market and are ready to leap the moment something good shows up. An agent also can help a buyer know when a home is priced too high, or when it’s a good deal, and can assist in negotiations.
SET A BUDGET
This is the biggest thing that people buying their first Ventura County in 2020 home skip over. They may think they know how much they can afford, but they fail to take all factors into account.
The listing price is not exactly what will be paid every month, or the total cost of ownership. Making sure to factor in items such as taxes, any other fees, utility costs, as well as any potential upkeep gives a more realistic idea of whether or not a first-time homebuyer can afford a specific home.
BUY FOR TOMORROW
Many first-time homebuyers purchase homes for what they need today and fail to think about what they may need tomorrow. And, a few years and a couple of kids down the road, they’re suddenly house shopping again.
People buying their first Ventura County home need to take their future plans into account when shopping, including potential marriage, kids, pets, and even job changes, all of which can affect whether they choose one home over another.
NEGOTIATE
When buying a home, nearly everything is negotiable. Many first-time homebuyers think only the price is on the table, meaning they pass up the opportunity to get a lot more bells and whistles in the purchase.
Repairs, potential big replacements, appliances, and even home warranties all can be negotiated, and many sellers are more willing to throw in these items than they are to decrease the overall price.
Buying a home is stressful, especially for first-timers. Our team of professionals can help people buying their first Ventura County home in 2020 to get the right fit.
Contact us today
at (805) 506-9720!
or visit us at www.LerinNeillRealtor.com
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Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
youtube
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
youtube
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
youtube
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
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Ascent Law St. George Utah Office
Ascent Law Ogden Utah Office
from Michael Anderson https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
from Criminal Defense Lawyer West Jordan Utah https://criminaldefenselawyerwestjordanutah.wordpress.com/2020/07/14/are-private-placements-exempt-transactions/
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Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
youtube
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
youtube
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
youtube
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
Recent Posts
Trucking Accidents
Utah Child Support
Does Bankruptcy Affect Divorce?
Baby Boomers Have The Most Divorces?
Estate And Gift Tax Lawyer
Railroad Accidents
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Ascent Law St. George Utah Office
Ascent Law Ogden Utah Office
Source: https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
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Text
Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
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Baby Boomers Have The Most Divorces?
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Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
youtube
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
youtube
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
youtube
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
Recent Posts
Trucking Accidents
Utah Child Support
Does Bankruptcy Affect Divorce?
Baby Boomers Have The Most Divorces?
Estate And Gift Tax Lawyer
Railroad Accidents
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Source: https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
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Text
Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
youtube
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
youtube
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
youtube
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
Recent Posts
Trucking Accidents
Utah Child Support
Does Bankruptcy Affect Divorce?
Baby Boomers Have The Most Divorces?
Estate And Gift Tax Lawyer
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Ascent Law St. George Utah Office
Ascent Law Ogden Utah Office
Source: https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
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Text
Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
youtube
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
youtube
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
youtube
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
Recent Posts
Trucking Accidents
Utah Child Support
Does Bankruptcy Affect Divorce?
Baby Boomers Have The Most Divorces?
Estate And Gift Tax Lawyer
Railroad Accidents
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Ascent Law St. George Utah Office
Ascent Law Ogden Utah Office
from Michael Anderson https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
from Divorce Lawyer Nelson Farms Utah https://divorcelawyernelsonfarmsutah.tumblr.com/post/623613141908144128
0 notes
Text
Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
youtube
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
youtube
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
youtube
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
Recent Posts
Trucking Accidents
Utah Child Support
Does Bankruptcy Affect Divorce?
Baby Boomers Have The Most Divorces?
Estate And Gift Tax Lawyer
Railroad Accidents
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Ascent Law St. George Utah Office
Ascent Law Ogden Utah Office
Source: https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
0 notes
Text
Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
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How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
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Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
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If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
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Baby Boomers Have The Most Divorces?
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Ascent Law St. George Utah Office
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from Michael Anderson https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
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Text
Are Private Placements Exempt Transactions?
An exempt transaction is a type of securities transaction where a business does not need to file registrations with any regulatory bodies, provided the number of securities involved is relatively minor compared to the scope of the issuer’s operations and that no new securities are being issued. Exempt securities are the instruments used that the government backs, which have tax-exempt status. An exempt transaction is a securities exchange that would otherwise have to register with the Securities and Exchange Commission (SEC) but does not because of the nature of the transaction in question.
youtube
How an Exempt Transaction Works
Exempt transactions cut down the amount of paperwork needed for relatively minor transactions. For example, it would be a big hassle to perform a filing with the SEC every time a non-executive employee wanted to sell back some of the company’s common shares he or she purchased as part of an employee stock purchase plan.
Types of Exempt Transactions
A private placement or Reg D offering is a type of exempt transaction in which the securities are not offered to the public, but are instead sold privately to an accredited investor. According to the SEC, an accredited investor can be:
• An insurance company, bank, business development company, small business investment company, or registered investment company
• An employee benefit plan administered by a bank registered investment company, or insurance company
• A tax-exempt charitable organization
• Someone with at least $1 million in net worth, excluding his or her primary residence
• A person with more than $200,000 in income, or joint income of more than $300,000 with a spouse in both of the previous two years
• An enterprise owned by accredited investors
• A general partner, executive officer, or director of the company selling the securities
• A trust with assets of at least $5 million, as long as it has not been formed just to buy the securities in question.
youtube
Other types of exempt transactions include Reg A offerings, also known as small business company offerings, which permit the issuing company to raise no more than $5 million in 12 months. This allows smaller companies to access securities markets to raise capital. Rule 147 offerings, or intrastate offerings, are also exempt. Transactions with financial institutions, fiduciaries, and insurance underwriters may be considered exempt. Unsolicited orders, which are those executed through a broker at the request of his or her client, are also considered exempt.
What should you do before investing?
Private placements may be pitched as a unique opportunity being offered to only a handful of investors, including you. Be careful. Don’t be fooled by this high-pressure sales tactic. Even if the deal is “unique,” it may not be a good investment. It is important for you to obtain all the information that you need to make an informed investment decision. In fact, issuers relying on the Rule 505 and 506(b) exemptions from registration must provide non-accredited investors an opportunity to ask questions and receive answers regarding the investment. If an issuer fails to adequately answer your questions, consider this a warning against making the investment. Unlike registered offerings in which certain information is required to be disclosed, investors in private placements are generally on their own in obtaining the information they need to make an informed investment decision. Investors need to fully understand what they are investing in and fully appreciate what risks are involved. In practice, issuers often provide a document called a private placement memorandum or offering memorandum that introduces the investment and discloses information about the securities offering and the issuer. However, this document is not required and the absence of this document or similar disclosure may be a red flag to consider before investing. Moreover, private placement memoranda typically are not reviewed by any regulator and may not present the investment and related risks in a balanced light. All issuers relying on a Regulation D exemption are required to file a document called a Form D no later than 15 days after they first sell the securities in the offering. The Form D will include brief information about the issuer, its management and promoters, and the offering itself. If the offering you are considering has prior sales, you can search for the Form D filing on the SEC’s website at sec.gov/edgar/searchedgar/webusers.htm.
youtube
If your broker recommends the investment, you should know that your broker, along with his or her firm, has a duty to conduct a reasonable investigation of the investment and the issuer’s representations about it. The scope of the investigation depends on the circumstances of the investment, including its complexity and the risks involved. For example, the private placement of shares by a large public company may warrant less investigation than a start-up with little or no track record. Generally, a broker should not just rely blindly on the issuer for information but should separately investigate and verify an issuer’s statements and claims. If your broker is recommending the investment and fails to satisfy its duties to investigate the issuer and the offering, this failure could constitute a violation of the antifraud provisions as well as other federal securities laws. In addition, your broker must determine whether an investment in the private placement is suitable for you. This means your broker will have to consider factors such as your age, financial situation, current and future needs, investment objectives and tax status. Your broker’s duties, however, should not substitute for your own judgment in making the investment. Your broker can assist and enable you to better understand the opportunity and risks, as well as investigate and gather additional information, but it is your money, your risk and your decision whether to invest. You should also ask about the compensation your broker is receiving for the transaction and any relationships, business ties or other conflicts of interest that may exist between your broker and the issuer.
What should I know about restricted securities?
Generally, most securities that you acquire in a private placement will be restricted securities. You should not expect to be able to easily and quickly resell your restricted securities. In fact, you should expect to hold the securities indefinitely. There are two principal things to think about before buying restricted securities. The first is that unless you have made arrangements with the issuer to resell your restricted securities as part of a registered offering, you will need to comply with an exemption from registration to resell. One rule commonly relied upon to resell requires you to hold the restricted securities for at least a year if the company does not file periodic reports (such as annual and quarterly reports) with the SEC. You may wish to hire an attorney to help you comply with the legal requirements to resell restricted securities. Issuers may require a legal opinion that you satisfy an exemption to resell your restricted securities.
The second thing to think about is whether they are easy to sell. This issue primarily affects the sale of restricted securities in private companies. Information about a private company is not typically available to the public, and a private company may not provide information to you or your buyer. The restricted status of your securities may also transfer to your buyer. For these reasons, it may be difficult to attract buyers. In addition to these considerations, specific contractual restrictions that you may enter into when investing may prevent you from freely transferring the securities. Despite not being subject to the same disclosure obligations as registered offerings, private placements are subject to the antifraud provisions of the federal securities laws. Any information provided must be true and may not omit any material facts necessary to prevent the statements made from being misleading. You should be aware that it may be difficult or impossible to recover the money you invest in an offering that turns out to be fraudulent. In addition, even though the offering may be exempt from SEC registration, the offering may have to separately comply with state securities laws, including state registration requirements or a state exemption from registration.
The Private Placement Memorandum (“PPM”) serves to disclose critical information to potential investors ensuring they are properly informed regarding the company’s operations, investment risks, SEC disclosures, and offering terms prior to investing. A unique aspect of our offering documents is the “Presentation Grade” quality of the memorandum document. A private placement memorandum will also have Exhibits to disclose additional needed information critical to the investment decision such as historical and projected financials, subscription documents, related contracts, company bylaws, and other pertinent supporting data.
youtube
For offerings executed under certain Regulation D exemptions the SEC has specific regulations that govern what is disclosed to investors. Regulation D Resources has adopted the SEC’s Form 1A disclosure standard for use in crafting our Regulation D exempt private placement memorandum documents. The Form 1A standard is the disclosure standard and disclosure format the SEC mandates for certain registered type securities offerings and exceeds what is typically required under a Regulation D exempt offering. Drafting our PPM’s to this standard provides several important benefits to our clients:
• A properly prepared Form 1A spec private placement memorandum protects the client more effectively than the “letter” or summary type offering documents typically prepared by other Regulation D preparatory firms
• Form 1A provides for a very high specification private placement memorandum document which greatly enhances the professionalism of your disclosure package for investors
• Form 1A is the disclosure standard most broker-dealer firms will require in order to have the offering approved for retail to their investor clients
Points That You Should Be Mindful Of In Steering a Private Placement Transaction from Start to Finish
Understand the company’s goals and needs. Private placements, including private investments in public equities (PIPEs), provide companies with great flexibility, allowing them to issue a variety of instruments common or preferred equity securities, straight or convertible debt securities, warrants, units, and/or bespoke securities tailored to meet their particular financing needs. A company considering a private placement may not be familiar with the range of securities available and may not fully appreciate how a particular security fits within its existing capital structure. As a starting point, you should discuss with the company its strategic objectives for the proposed financing within the context of its existing capital structure and, within this framework, assist the company in deciding what type of security is best suited to the company’s goals and needs.
Find your U.S. federal securities law exemption for issuance and understand resale limitations.
Private placements occur within a complex and evolving regulatory framework of U.S. federal securities laws, stock exchanges’ rules, regulators’ interpretations, and companies’ own limitations under their existing capital structures. For purposes of U.S. federal securities laws, the fundamental principle is that a company may not offer or sell securities unless the transaction has been registered with the SEC or an exemption from registration is available. For a private placement to comply with the U.S. federal securities laws there must be a valid exemption from the registration requirements available, and the terms and execution of the proposed offering and sale must comply with the requirements of that exemption. You should engage in a collaborative exercise with the issuing company to identify the exemption that is best suited to the proposed transaction from the range of available exemptions, including, among others:
• Section 4(a)(2) exemption (Section 4(a)(2)) under the Securities Act of 1933, as amended, 15 U.S.C. § 77a et seq., (Securities Act)
• Safe harbors of Regulation D under the Securities Act
• Quasi-public offering structure of Regulation A (informally known as Regulation A+) under the Securities Act
• Crowd funding exemption under Section 4(a)(6) of the Securities Act (Section 4(a)(6))
• Exemption for private placements under Rule 144A of the Securities Act (Rule 144A)
• Offshore transaction exemption under Regulation S of the Securities Act
• Exchange offer exemption of Section 3(a)(9) of the Securities Act
In order to choose an appropriate exemption, it will be necessary to know various key facts, including the proposed size of the potential offering, identity of the potential investors (and how they will be identified), location of potential investors, whether an investment bank will be engaged to facilitate the offering and, if so, in what capacity, the nature and extent of the marketing and distribution process, and other factors.
How Private Placements are Governed
Private placements are not an asset class. They are a technique by which capital is raised from non-institutional private capital sources, mainly individuals. They can be used as a vehicle for investments in private equity, venture capital, and some tangible assets, for example.
A multitude of state and federal laws and regulations govern private placements, including:
• The Securities Act of 1933, which governs the issuance of securities by companies
• The Securities Exchange Act of 1934, which governs the trading, purchase and sale of those securities
• Regulations derived from the 1933 and 1934 Securities Acts, promulgated by the Securities and Exchange Commission especially Regulation D
• Regulations promulgated by the Financial Industry Regulatory Authority and the various stock exchanges
• State securities laws and regulations, known as blue sky laws, administered by the various state securities commissions.
Private Placement Securities
In a private placement, the shares of stock or debt instrument are considered securities under both federal and state securities laws. Consequently, any transaction involving the shares or debt must be registered under such securities laws or be exempt from registration. Typically, the offeror is an emerging growth company that has few capital alternatives, although more mature companies tend to be more successful in this process. Securities laws generally require that offers are made mainly to accredited investors.
Free Initial Consultation with Lawyer
It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
Ascent Law LLC
4.9 stars – based on 67 reviews
Recent Posts
Trucking Accidents
Utah Child Support
Does Bankruptcy Affect Divorce?
Baby Boomers Have The Most Divorces?
Estate And Gift Tax Lawyer
Railroad Accidents
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Ascent Law St. George Utah Office
Ascent Law Ogden Utah Office
Source: https://www.ascentlawfirm.com/are-private-placements-exempt-transactions/
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Surrogate End Points Ain’t all that Bad
By CHADI NABHAN MD MBA
Life is busy, yet we somehow find time to stay engaged on social media, remain engrossed in the 24/7 news cycle, and continue our futile efforts to resist clickbait. While social media can allow us to mindlessly scroll through feeds, it also provides an avenue to provoke vigorous dialogue, however diverse, controversial, or even rooted in unfettered biases. These exchanges have served as the primordial soup for virtual friend or foe-ships. Tense and argumentative Twitter exchanges are especially entertaining given the challenges in justifying a position in fewer than 280 characters. Thus, tweetorials have emerged to explain a point of view via a thread of comments since it is not always easy to do so in 1 or 2 tweets. The longer the tweetorial, the more heated the debate. What I am trying to get at here, somewhat obtusely, is the concept of surrogates.
I have already suggested a surrogate. Length of a tweetorial is a surrogate for degree of controversy of the topic. Meaning, length is a surrogate, a proxy. We are surrounded by surrogates. Longer wait lines at restaurants and bars imply a hipper joint or tastier menu. My child being extra nice to me is a surrogate for him wanting more time on electronics. Not a day goes by without folks arguing about surrogate endpoints. I wanted to dig deeper into surrogates and since I am a physician, I’m focusing on surrogates in medicine. Apologies to those who thought I would be discussing restaurants or exotic trips.
I want to make sure my definition of surrogates is accurate: Merriam-Webster dictionary for enlightenment. The first use of the word “surrogate” was in 1533, B.T. (“Before Twitter”). A surrogate is defined as “one appointed to act in place of another” or “one that serves as a substitute”. We use surrogate endpoints in clinical trials as a substitute for other end points.
How ubiquitous are surrogates? Interrogating PubMed with the phrase “surrogate endpoints” returns 831,224 articles. Don’t bother verifying – I’m sure you’ll get a higher number as academia relentlessly churns out papers involving “surrogates.” I conducted a very informal survey of what people think of surrogate end points. It won’t surprise you that surrogate end points are heavily criticized. But, at the risk of being shouted at on Twitter, or losing followers, I believe the rage against surrogate end points is a bit unfair.
The FDA defines a surrogate endpoint as “a marker, such as a laboratory measurement, radiographic image, physician sign, or other measure, that is not itself a direct measurement of clinical benefit, and (A) is known to predict clinical benefit and could be used to support traditional approval of a drug or biological product; or (B) is reasonably likely to predict clinical benefit and could be used to support the accelerated approval of a drug or biological product in accordance with section 506(c)”.
Note, implicit in the FDA-definition of surrogate end-points is a recognition of their limitations. I understand surrogates can be misused and abused. I understand that sometimes the wrong surrogate endpoint is studied. I know that they don’t always correlate with real outcomes and that some endpoints might not be relevant to patients. Using the wrong surrogate endpoint can lead to overtreatment and harm. Nevertheless, surrogate endpoints aren’t always bad. I mean, I know that fast heart rate (like I am experiencing now) is not always a surrogate for an arrhythmia, but sometimes it is. Pitfalls of surrogate endpoints apply to the real endpoints. How many real endpoints have been abused and how many are truly meaningful to patients?
Measuring real outcomes, such as all-cause mortality, takes longer time than measuring a surrogate, such as median survival. Trying to show incremental improvement of outcome in a disease that has a survival of 90% at 5 years is challenging. A study attempting to show the efficacy of a drug might be irrelevant by the time it is published given evolving therapies and changing understanding of mechanisms of disease. It may take us years to show that lowering lipids reduces subsequent heart attacks in a patient who has already had a cardiac event. However, if we can correlate lower serum lipids with fewer heart attacks, perhaps all we need to show is a drug’s ability to lower lipids for a few months after initiation and demonstrate that this effect is lasting.
Using surrogate endpoints can save biomedical research precious dollars which can be allocated to answer other pressing questions. If the surrogate endpoint is selected wisely and studying it is successful, a potential new entrant to market might reach patients in need sooner. Is there no welfare gain getting therapies to sick patients sooner?
Having cheap, available, and easily measured and monitored surrogate endpoints is an advantage that is valuable for clinicians and researchers. I know that many will cite where surrogate endpoints have failed, but I want to remind us all where we have been successful. Overall survival in colorectal cancer correlates with relapse-free survival at 3 years. Event-free survival at 24 months’ correlates with better survival in diffuse large B-cell lymphoma. If a PET scan is positive after 2 chemotherapy cycles for Hodgkin lymphoma, progression and relapse are more likely. A PET scan that is positive at the end of treatment of follicular lymphoma predicts early relapse. Detectable serum PSA in patients who have undergone radical prostatectomy is a marker for impending relapse. We may choose not to intervene on a slowly rising PSA, but we must acknowledge that measurable PSA after radical surgery indicates pending relapse. If a regimen delays detectable PSA after such surgery, then it likely delays relapse, an important endpoint for some patients. And yes, I know one thing or more outside of oncology. Lowering HgbA1C in patients with diabetes mellitus to below 7% markedly decreases complications. The list is long on both sides, but we must manage this political divide (which can be tough with current climate) and try to find a way to move forward.
I will concede that intervening based on a surrogate endpoint might not benefit all patients but will always argue that some patients do benefit, and our goal is to identify these patients. My colleague and friend Vinay Prasad is no fan of surrogate endpoints (as his >24k followers on twitter will attest), but even he argues, along with Robert Kemp, that surrogate endpoints have a role if properly validated (https://bmcmedicine.biomedcentral.com/articles/10.1186/s12916-017-0902-9). Interestingly, if you type “surrogate endpoints” in Google’s search bar, this paper appears as # 5, so mentioning it is a strategic move on my part to generate a smile from Vinay and Robert.
While acknowledging their limitations, let us not throw the baby out with the bath water. I will argue that advances in medicine depend on finding the best surrogate endpoints for every disease, not in abandoning them altogether. I would love to see us approving regimens only if overall survival is improved but this is not possible as patients are thankfully living longer because of advances. We simply do not have the resources or the time to always achieve the real endpoint, and we owe it to our patients not to shortchange them by attempting methodological purity.
I might vanish from Twitter for few days to avoid backlash.
About the author:
Chadi Nabhan is an oncologist in Chicago. His interests include strategy and business of healthcare. He’s a prolific speaker, and occasional tweeter. He can be reached @chadinabhan
Surrogate End Points Ain’t all that Bad published first on https://wittooth.tumblr.com/
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Moncton SEO Expert - Rise Atlantic - (506)799-2441
Moncton SEO Expert - Rise Atlantic - (506)799-2441 Looking for a Moncton SEO expert? Please visit our website at: https://ift.tt/2PwqTON If your not on page one of Google then who is? That's right your competitor is, stop loosing money. Looking for more Clients? More Brand Awareness? More Sales? If you answered yes to any of these, then Rise Atlantic Moncton can help. We specialize in getting you to the top of google's listings to get you more Brand Awareness, More Clients and Leads which means more Sales. Rise Atlantic Moncton SEO has over 15 years of experience in online marketing and has been working with Google to get top listings the safe and correct way by having the proper listings, site and content. If you are a local company it's vital to have your site listed locally in a google search, google maps, apple maps, Bing and more. Rise Atlantic Moncton can not only get you listed on all of these but listed at the top, so your company or brand is found quickly. Having your Moncton business listed in Google and other search engines is a must for the future of your business. Do you realise how many people search for local companies now? Do you realize how many people carry a cell phone now? Gone are the days of word to mouth, even if your company is suggested to someone what do you think the first thing they do is? That's right they googled you. Now just being on Google is not the answer either, you have to be on page one or number one when someone types in your keyword if you not then it's pointless. No one searches for a Moncton Plumber and clicks through 3 or 4 pages. This is where our SEO experts come into play; we will get you not only on Google but on page one or number one. We have done SEO for Moncton and just about every other area and have never failed to reach first page results. Stop giving your competitor money and contact us today. https://ift.tt/2PwqTON Connect with us: https://ift.tt/2QPYT5l https://twitter.com/monctonriseatla #MonctonSEO #seomoncton #monctonwebsitedesign #monctonwebdesigncompanies #RiseAtlanticMoncton https://youtu.be/758Has3Olzc ศูนย์ jeunesse ธุรกิจ อาหาร ทำ เงิน ที่ น่า สนใจjeunesse ธเนตร วงษาธุรกิจมาแรงแห่งยุค ด้วยนวัตกรรมใหม่ Luminesce Stem Cell Growth Factor Technology สร้างหารายได้เสริมทางเน็ตหลักหมื่น-แสน บาท/เดือน. สร้างอาชีพ หางานรายได้เสริม 6หลักใน3เดือน7หลักใน1ปี Jeunesse jeunesse ดีอย่างไร ธุรกิจ อาหาร ทำ เงิน ที่ น่า สนใจทำเงินมาแรงที่ สุด, แผนธุรกิจ,ผลประโยนช์, อาชีพ หางานรายได้เสริม ,ท่อง เทียวรอบโลก Line: Victorywinwin Tel 094-3399030 https://ift.tt/1riEetx
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Moncton SEO Expert - Rise Atlantic - (506)799-2441
Moncton SEO Expert - Rise Atlantic - (506)799-2441 Looking for a Moncton SEO expert? Please visit our website at: https://ift.tt/2PwqTON If your not on page one of Google then who is? That's right your competitor is, stop loosing money. Looking for more Clients? More Brand Awareness? More Sales? If you answered yes to any of these, then Rise Atlantic Moncton can help. We specialize in getting you to the top of google's listings to get you more Brand Awareness, More Clients and Leads which means more Sales. Rise Atlantic Moncton SEO has over 15 years of experience in online marketing and has been working with Google to get top listings the safe and correct way by having the proper listings, site and content. If you are a local company it's vital to have your site listed locally in a google search, google maps, apple maps, Bing and more. Rise Atlantic Moncton can not only get you listed on all of these but listed at the top, so your company or brand is found quickly. Having your Moncton business listed in Google and other search engines is a must for the future of your business. Do you realise how many people search for local companies now? Do you realize how many people carry a cell phone now? Gone are the days of word to mouth, even if your company is suggested to someone what do you think the first thing they do is? That's right they googled you. Now just being on Google is not the answer either, you have to be on page one or number one when someone types in your keyword if you not then it's pointless. No one searches for a Moncton Plumber and clicks through 3 or 4 pages. This is where our SEO experts come into play; we will get you not only on Google but on page one or number one. We have done SEO for Moncton and just about every other area and have never failed to reach first page results. Stop giving your competitor money and contact us today. https://ift.tt/2PwqTON Connect with us: https://ift.tt/2QPYT5l https://twitter.com/monctonriseatla #MonctonSEO #seomoncton #monctonwebsitedesign #monctonwebdesigncompanies #RiseAtlanticMoncton https://youtu.be/758Has3Olzc อยากมีอยากหารายได้เสริมหลักแสน หลักล้าน คุณทำได้ งานลงทุนออนไลน์ ใช้โซเชี่ยล100% สร้างอยากมีอยากหารายได้เสริม 6หลักใน3เดือน7หลักใน1ปี เรียนรู้วิธี จากประสบการณ์จริง หาธุรกิจน่าทำ ที่ น่า ลงทุน ใน ปัจจุบันอยากมี “ธุรกิจน่าทำ ที่ น่า ลงทุน ใน ปัจจุบัน” เริ่มต้นยังไงดี. เริ่มต้นธุรกิจ ที่ น่า ลงทุน ใน ปัจจุบันทำอาชีพ หาธุรกิจส่วนตัว อยากมี “ธุรกิจส่วนตัว” เริ่มต้นยังไงดี. เริ่มต้นธุรกิจน่าทำส่วนตัว ทำธุรกิจออนไลน์ การทําธุรกิจบนอินเตอร์เน็ตธุรกิจน่าทำอิสระบนโลกงานออนไลน์ทำที่บ้าน รายได้พิเศษออนไลน์เข้าถึงทุกกลุ่มเป้าหมาย เป็นธุรกิจน่าทำที่มีความอิสระในตัวสูงมาก มีข้อดีมากสำหรับการลงทุนใน ธุรกิจออนไลน์ ��ุ้มค่า. Line: Love-Quotes โทร 094-3399030
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Surrogate End Points Ain’t all that Bad
By CHADI NABHAN MD MBA
Life is busy, yet we somehow find time to stay engaged on social media, remain engrossed in the 24/7 news cycle, and continue our futile efforts to resist clickbait. While social media can allow us to mindlessly scroll through feeds, it also provides an avenue to provoke vigorous dialogue, however diverse, controversial, or even rooted in unfettered biases. These exchanges have served as the primordial soup for virtual friend or foe-ships. Tense and argumentative Twitter exchanges are especially entertaining given the challenges in justifying a position in fewer than 280 characters. Thus, tweetorials have emerged to explain a point of view via a thread of comments since it is not always easy to do so in 1 or 2 tweets. The longer the tweetorial, the more heated the debate. What I am trying to get at here, somewhat obtusely, is the concept of surrogates.
I have already suggested a surrogate. Length of a tweetorial is a surrogate for degree of controversy of the topic. Meaning, length is a surrogate, a proxy. We are surrounded by surrogates. Longer wait lines at restaurants and bars imply a hipper joint or tastier menu. My child being extra nice to me is a surrogate for him wanting more time on electronics. Not a day goes by without folks arguing about surrogate endpoints. I wanted to dig deeper into surrogates and since I am a physician, I’m focusing on surrogates in medicine. Apologies to those who thought I would be discussing restaurants or exotic trips.
I want to make sure my definition of surrogates is accurate: Merriam-Webster dictionary for enlightenment. The first use of the word “surrogate” was in 1533, B.T. (“Before Twitter”). A surrogate is defined as “one appointed to act in place of another” or “one that serves as a substitute”. We use surrogate endpoints in clinical trials as a substitute for other end points.
How ubiquitous are surrogates? Interrogating PubMed with the phrase “surrogate endpoints” returns 831,224 articles. Don’t bother verifying – I’m sure you’ll get a higher number as academia relentlessly churns out papers involving “surrogates.” I conducted a very informal survey of what people think of surrogate end points. It won’t surprise you that surrogate end points are heavily criticized. But, at the risk of being shouted at on Twitter, or losing followers, I believe the rage against surrogate end points is a bit unfair.
The FDA defines a surrogate endpoint as “a marker, such as a laboratory measurement, radiographic image, physician sign, or other measure, that is not itself a direct measurement of clinical benefit, and (A) is known to predict clinical benefit and could be used to support traditional approval of a drug or biological product; or (B) is reasonably likely to predict clinical benefit and could be used to support the accelerated approval of a drug or biological product in accordance with section 506(c)”.
Note, implicit in the FDA-definition of surrogate end-points is a recognition of their limitations. I understand surrogates can be misused and abused. I understand that sometimes the wrong surrogate endpoint is studied. I know that they don’t always correlate with real outcomes and that some endpoints might not be relevant to patients. Using the wrong surrogate endpoint can lead to overtreatment and harm. Nevertheless, surrogate endpoints aren’t always bad. I mean, I know that fast heart rate (like I am experiencing now) is not always a surrogate for an arrhythmia, but sometimes it is. Pitfalls of surrogate endpoints apply to the real endpoints. How many real endpoints have been abused and how many are truly meaningful to patients?
Measuring real outcomes, such as all-cause mortality, takes longer time than measuring a surrogate, such as median survival. Trying to show incremental improvement of outcome in a disease that has a survival of 90% at 5 years is challenging. A study attempting to show the efficacy of a drug might be irrelevant by the time it is published given evolving therapies and changing understanding of mechanisms of disease. It may take us years to show that lowering lipids reduces subsequent heart attacks in a patient who has already had a cardiac event. However, if we can correlate lower serum lipids with fewer heart attacks, perhaps all we need to show is a drug’s ability to lower lipids for a few months after initiation and demonstrate that this effect is lasting.
Using surrogate endpoints can save biomedical research precious dollars which can be allocated to answer other pressing questions. If the surrogate endpoint is selected wisely and studying it is successful, a potential new entrant to market might reach patients in need sooner. Is there no welfare gain getting therapies to sick patients sooner?
Having cheap, available, and easily measured and monitored surrogate endpoints is an advantage that is valuable for clinicians and researchers. I know that many will cite where surrogate endpoints have failed, but I want to remind us all where we have been successful. Overall survival in colorectal cancer correlates with relapse-free survival at 3 years. Event-free survival at 24 months’ correlates with better survival in diffuse large B-cell lymphoma. If a PET scan is positive after 2 chemotherapy cycles for Hodgkin lymphoma, progression and relapse are more likely. A PET scan that is positive at the end of treatment of follicular lymphoma predicts early relapse. Detectable serum PSA in patients who have undergone radical prostatectomy is a marker for impending relapse. We may choose not to intervene on a slowly rising PSA, but we must acknowledge that measurable PSA after radical surgery indicates pending relapse. If a regimen delays detectable PSA after such surgery, then it likely delays relapse, an important endpoint for some patients. And yes, I know one thing or more outside of oncology. Lowering HgbA1C in patients with diabetes mellitus to below 7% markedly decreases complications. The list is long on both sides, but we must manage this political divide (which can be tough with current climate) and try to find a way to move forward.
I will concede that intervening based on a surrogate endpoint might not benefit all patients but will always argue that some patients do benefit, and our goal is to identify these patients. My colleague and friend Vinay Prasad is no fan of surrogate endpoints (as his >24k followers on twitter will attest), but even he argues, along with Robert Kemp, that surrogate endpoints have a role if properly validated (https://bmcmedicine.biomedcentral.com/articles/10.1186/s12916-017-0902-9). Interestingly, if you type “surrogate endpoints” in Google’s search bar, this paper appears as # 5, so mentioning it is a strategic move on my part to generate a smile from Vinay and Robert.
While acknowledging their limitations, let us not throw the baby out with the bath water. I will argue that advances in medicine depend on finding the best surrogate endpoints for every disease, not in abandoning them altogether. I would love to see us approving regimens only if overall survival is improved but this is not possible as patients are thankfully living longer because of advances. We simply do not have the resources or the time to always achieve the real endpoint, and we owe it to our patients not to shortchange them by attempting methodological purity.
I might vanish from Twitter for few days to avoid backlash.
About the author:
Chadi Nabhan is an oncologist in Chicago. His interests include strategy and business of healthcare. He’s a prolific speaker, and occasional tweeter. He can be reached @chadinabhan
Surrogate End Points Ain’t all that Bad published first on https://wittooth.tumblr.com/
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