While no true definition of a private placement exists, it is commonly used to refer to the raising of capital (i.e., “securities”) without making a registration with the United States Securities and Exchange Commission (SEC).
Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. The most commonly used method to obtain an exemption when conducting a private placement is Regulation D, which contains two exemptions in Rule 504 and Rule 505 and one safe harbor in Rule 506.
In order to conduct a private placement properly, the issuer must follow a multitude of requirements. Some of these requirements encompass:
-How much capital can be raised
-Who can be offered the securities
-When can the securities be offered
-Who can offer the securities
-Advertising and soliciation
-Where the securities are offered