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Private Placements

What is a Private Placement?

Under the Securities Act of 1933, a company that offers or sells its securities must register the securities or find an exemption from the registration requirements. The Act provides companies with a number of exemptions. For the private placements offered by IMMS, the most common exemptions utilized are Rule 505 and Rule 506 of Regulation D.

For a complete look at the exemptions available and a complete text of the Rule 505 and Rule 506, please click here to be taken to the SEC Website.

A Basic View of a Private Placement and the type offered by IMMS:

A Private Placement in the most basic sense is the “sale” of an issue of a debt or equity security to a single buyer or to a limited number of buyers without a public offering. Unlike public offerings, a private placement does not have to be registered with the Securities and Exchange Commission (SEC), provided the securities are bought for investment purposes and not for resale and the issuer qualifies for an exemption.

Because private placements are offered to a specific type of buyer, and for a specific period of time (either until the capital required is raised or the offering of the investment expires), these investments are not always available at all times. This characteristic of private placements is why the security is considered to be bought for investment purposes and not for resale. They are not available in a public forum, such as the stock market, where buyers are sellers are always available.

In order for an issuer to obtain the exemption, not only must they qualify based on one of the exemptions available, they must also file and prepare a Private Placement Memorandum (PPM). The PPM must contain a complete description of the security and the terms of the sale. It must also include applicable information about the issuer’s financial situation and applicable risk factors. An issuer is required to deliver a full PPM to any buyer prior to the offering and sale of the investment to a potential buyer.

I don’t fully understand the terminology of a public offering versus not offered to the public.

The easiest way to understand the difference is to consider the notion of stocks available in the stock market. Stocks are securities offered by companies in a public setting. All securities available in this setting are registered with the SEC. The registration of these types of securities subjects the company to several filing requirements, making information about the company very public. In addition, the securities can easily be bought and sold to investors. There is a constant offering of the securities. One investor can easily sell or buy the securities from or to another investor at any time. The securities are in the sense public.

In the private setting, the securities are not registered with the SEC. There is not an open forum in which to purchase and or sell the securities to investors. Investors may not be able to sell the securities to another investor at any given time. In many cases, private placements occur frequently without the knowledge of the general public. This also supports the statement that private placements are purchased for “investment purposes” and not for resale. Purchases of private placements are aware that the funds used to purchase these securities could be illiquid for several years until the investment performs as described in the PPM and the funds are returned to the investor per the liquidation guidelines set forth in the PPM. In addition, because the issuer is not subject to the filing requirements of the SEC, the PPM serves as an important tool for investors to analyze the investment. The PPM serves as the tool to provide the investor information about the issuer and their financials.

I understand the notion of a single buyer, but what are the limited buyers?

To clarify, a single buyer in most cases will be an institutional investor[1] who will purchase the investment in its entirety. As to the use of limited buyers, buyers can be termed “limited” in one of two ways:

The number of buyers – In most cases, the issuer will not allow any more than 35 buyers to purchase any amount of the offering
The type of buyer – this refers to the issuer only allowing buyers that meet the SEC Definition of an accredited investor to purchase shares of the security.
Offering an investment to only these types of buyers, and not the general public, allows an issuer to file for an exemption from the registration requirements of the SEC, and the investment is termed a private placement.

What is the SEC Definition of an Accredited Investor as it pertains to individuals?

The federal securities laws define the term accredited investor in Rule 501 of Regulation D as: (as pertaining to individuals)

A natural person who has an individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of purchase, excluding the value of the primary residence of such person.
A natural person with income exceeding $200,00 in each of the two most recent years or joint income with a spouse exceeding $300,000 in the two most recent years with a reasonable expectation of the same income level in the current year;
A trust with assets in excess of $5 million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.
To be considered an accredited investor, an individual must meet one of the definitions above.

For more information on Accredited Investors and determine if you are, please visit the SEC website link below:

What if I want to learn more about Private Placements?

We at IMMS highly encourage you to understand the pros and cons to any investment. The SEC and FINRA have provided several FAQ’s for investors regarding these types of investments. The links are below.



This is not an offer or solicitation of a private placement investment. The information provided is for educational purposes only.

IMMS would like to remind each and every investor that if at any time they are solicited for a private placement they should be presented with a complete unaltered copy of the issuers PPM. IMMS would also like to encourage each investor to read the PPM in its entirety to get a complete understanding of the risks involved with the investment and to understand the investment strategy and objective of the investment.

Private Placement offerings are only available to accredited investors. Please be sure to visit the SEC website link to determine if you qualify.

Placement Securities are offered through Titan Securities, member FINRA|SIPC.

Walt Parker and the registered persons associated with Investing Makes Me are all licensed representatives of Titan Securities, doing business under the name of Investing Makes Me and Titan Securities are not affiliated.

All investment strategies involve the risk of loss of a portion of or all assets. Past performance is no guarantee of future results. Consider the issuers investment objectives, risks, charges and expenses carefully before investing.

Private Placements are subject to substantially higher upfront fees, charges and expenses borne by the investor.

[1] An Institutional Investor is a business devoted to holding and managing assets, either for clients or for itself. Examples include mutual funds, banks, holding companies, insurance companies, depository institutions, endowment funds and pension funds.

Investments involve a high degree of risk, may be considered speculative, and may result in the entire loss of the amount invested. Investments incur substantial fees and expenses which are borne by the investor. Securities and Investment Advisory Services offered through Titan Securities, member FINRA|SIPC. and Titan Securities are not affiliated.

Call: 972-463-3833

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