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Advertising now allowed for some private placements

By Sean Sweeney on November 23, 2013

Vintage World MapThere are a number of investments generally known as private placements, or regulation D investments, that are sold to investors by broker-dealers. These securities are unregistered, meaning they do not have to meet the stringent disclosure requirements of a public offering nor are they typically traded on any secondary market (like the stock market). Typically these investments cannot be advertised and can only be sold to those investors which the broker-dealer has a prior existing relationship. That may be about to change for one type of these private placements.

As a part of the “Jumpstart Our Business Startups (JOBS) Act,” the SEC has lifted its ban on general advertising and solicitation for some private placements. These 506(c) offerings are only allowed to be sold to “accredited investors,” or those investors with a net worth over $1 million or $200,000 to $300,000 in income over the previous two years.

Investors need to be weary of these offerings. While there is nothing fundamentally wrong with private placement investments, your entire principal is generally at risk, you typically will have a difficult time selling your investment, and you will often receive less information about the company than you would if it were a registered offering. If you see an advertisement for a private placement and are interested in investing be doubly sure you understand the risks involved and the practical implications of the lack of liquidity.

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320 E Buffalo St
Ste 611
Milwaukee, WI 53202

Open Today 8:00am - 5:00pm

Open Saturday and Sunday for calls and emails.

More Info Directions (414) 755-5020