Private Placement Basics – Part II

[Continued from Private Placement Basics – Part I]

Due Diligence and the Suitability of Private Placements

The SEC’s recent amendments to Regulation D in accordance with the JOBS Act do not diminish a firm’s responsibility to conduct adequate due diligence on its offerings to ensure that any recommendations made to potential investors to purchase securities in a private placement are suitable. Additionally, as private placement sales activities continue to be among FINRA’s list of regulatory hot topics, FINRA will examine firms’ private placement activity to determine if firms are taking reasonable steps to confirm that investors meet accredited investor standards.

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Regulation Crowdfunding – Part I

On October 30, 2015, the Securities and Exchange Commission (the “SEC”) voted to adopt Regulation Crowdfunding (“Regulation CF”) under the provisions of Title III of the JOBS Act of 2012 (the “JOBS Act”).  The final rules adopted under Regulation CF became effective on May 16, 2016, with entities wishing to act as broker-dealers or “crowdfunding portals” for such offerings starting the application process with the Financial Industry Regulatory Authority, Inc. (“FINRA”) as early as the end of January.

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