… and what you can do about finders’ fees
A PPM is the starting point document for raising capital.
A private placement memorandum is a detailed and layered document. It is the document that governs the terms and conditions of the investment. It sets forth the compensation plan for the principals and the anticipated expenses of the offering, including marketing, legal and compliance. It is a key component of the Offering Documents Package that issuers use to solicit interest.
Pay someone to draft a rigorously professional PPM or preferably do it yourself. Investors will judge your investment opportunity on the quality of your Offering Documents Package, especially your PPM.
Nota bene: Many startups ignore most if not all Federal and state regulations and never have anything to worry about. No harm, no fault. If an investor has not lost money, a lawsuit can make him look greedy unless there was fraud.
But the problem with not complying with securities law is this: You have to return the investor’s money immediately and without other recourse if for any reason they want their money back. You can be penalized with both state and Federal fines and penalties and you can be deemed a “bad actor” by FINRA. Plus you will always have to include this unsavory information in future PPMs and Offering Packages.
“I was presented with a private placement memorandum (PPM) that looked very professional and had a quality marketing presentation. It identified my company as a sales agent for the exempt offering. In other words, it was my job to sell the deal and generate revenue to pay back the investors.”
This is taken from a letter to Private Placement Advisors from a client (solicited); It highlights the need to fully describe the marketing, legal and regulatory expenses associated with an offering under Rule 506(c or other JOBS Act exemption.
Every PPM must address the strictly enforced SEC rules and regulations covering finder’s fees.
To learn more, listen to a very brief audiobook by Douglas Slain, BUSINESS BROKERS AND SECURITIES LAWS: HOW TO AVOID BECOMING AN UNLICENSED BROKER-DEALER.
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Schedule your free 20-minute consultation on possible JOBS Act solutions for your company’s capital raise @ 415-320-5496 today.
