Phone: 949-468-0357 Fax: 866-268-9874

Private Placement.

Our Firm offers investments in Direct Private Placement (Private Equity/Real Estate Assets) Also known as Direct Participation Programs (DPP), Alternative Investments, or Non-Traditional Assets.

What is a Private Placement?

A Private Placement is a direct private offering of securities to a limited number of sophisticated and Accredited Investors. It is the opposite of a public offering. Securities issued as private placements include equity and debt securities. In the United States, private placements are exempt from public registration under the Securities Act of 1933. While the procedure for conducting a private placement pursuant to the exemption is less stringent than for that of a public offering, the process requires a careful compliance with the terms and restrictions of Regulation D. Private placements are attractive to investors because they should, in theory, offer modestly higher returns than comparable publically traded securities. Our investors also tend to realize less volatility in their portfolios in these types of investments due to its low-correlated relationship to stocks since they are not publically traded.

According to the university’s annual report, Yale, the second-richest university after Harvard University, has dramatically reduced its dependence on domestic marketable securities over the past two decades by shifting to nontraditional asset classes. In 1989,70% of the endowment was invested in stocks, bonds, and cash. Today [2010], only 11.5% is invested in domestic marketable securities. Foreign equity, private equity, absolute return strategies, and real assets, which include real estate and commodities, represent 88.5% of the target portfolio, Yale’s endowment report noted.

– Paula Vassan, Editor of aiCIO (03-09-2010).


Question: “Why is their no information on these investments on the Internet? How come I never heard of them before?”

Answer: Rule 506 of Regulation D – from

Rule 506 of Regulation D is considered a “safe harbor” for the private offering exemption of Section 4(2) of the Securities Act. Companies using the Rule 506 exemption can raise an unlimited amount of money. A company can be assured it is within the Section 4(2) exemption by satisfying the following standards:

  • The company cannot use general solicitation or advertising to market the securities;
  • The company may sell its securities to an unlimited number of “accredited investors” and up to 35 other purchases. Unlike Rule 505, all non-accredited investors, either alone or with a purchaser representative, must be sophisticated—that is, they must have sufficient knowledge and experience in financial and business matters to make them capable of evaluating the merits and risks of the prospective investment;
  • Companies must decide what information to give to accredited investors, so long as it does not violate the antifraud prohibitions of the federal securities laws. But companies must give non-accredited investors disclosure documents that are generally the same as those used in registered offerings. If a company provides information to accredited investors, it must make this information available to non-accredited investors as well;
  • The company must be available to answer questions by prospective purchasers;
  • Financial statement requirements are the same as for Rule 505; and
  • Purchasers receive “restricted” securities, meaning that the securities cannot be sold for at least a year without registering them.

While companies using the Rule 506 exemption do not have to register their securities and usually do not have to file reports with the SEC, they must file what is known as a “Form D” after they first sell their securities. Form D is a brief notice that includes the names and addresses of the company’s owners and stock promoters, but contains little other information about the company.

In February 2008, the SEC adopted amendments to Form D, requiring that electronic filing of Form D be phased in during the period September 15, 2008 to March 16, 2009. Although as amended, the electronic Form D requires much of the same information as the paper Form D, the amended Form D requires disclosure of the date of first sale in the offering. Previously, the closing date of an offering was used as the first date of sale. The Office of Small

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Business Policy has posted information on its web page about the filing requirement for the new Form D.

If you are thinking about investing in a Reg D company, you should access the EDGAR database to determine whether the company has filed Form D. If you need a copy of a Form D filed as a paper filing (which will include any Form D filed before September 15, 2008), you can request a copy. If the company has not filed a Form D, this should alert you that the company might not be in compliance with the federal securities laws using the online form

You should always check with your state securities regulator to see if it has more information about the company and the people behind it. Be sure to ask whether your state regulator has cleared the offering for sale in your state. You can get the address and telephone number for your state securities regulator by calling the North American Securities Administrators Association at (202) 737-0900 or by visiting its website. You’ll also find this information in the state government section of your local phone book.

For more information about the SEC’s registration requirements and common exemptions, read the brochure, Q&A Small Business & the SEC.

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