Private Placement Memorandum

Accredited Investor Lists Help Raise Money

An Accredited Investor List Can Help You to Raise Money

If you are raising capital, an accredited investor list can help you to reach more investors that are qualified and able to put money into your deal. When raising money using a Reg D offering, it is important to work with accredited investors to stay in compliance with the SEC. The challenge is that there is no way to tell if someone meets the qualification standards when you meet them. A list will help to save you time by sending you directly to the people that meet the SEC standards.

The SEC has set criteria for what makes a person an accredited investor. This includes:

Income. The investor needs to make $200,000 a year by themselves for the past two years or $300,000 per year with their spouse. They must also believe that their income will continue at that level or greater.

Assets. An investor may qualify if their net worth is over $1 million, excluding their primary residence. In order to calculate net worth, review their assets and liabilities. Once their debts, minus their first mortgage, have been deducted from their total assets you get their net worth.

Even when people have good jobs and a big house, they may fall short of the SEC’s standards for what makes an accredited investor. This is why purchasing an accredited investor list can save you a lot of time. You won’t have to wonder or guess if someone meets the criteria. All you need to do is pick up the phone and start calling.

The accredited investor list can be broken down by several areas including demographics, geographic location, and even industry niche. For example, you can purchase oil and gas leads to raise money for a private placement in that industry. The more you narrow down your lead list; the better your chances of success are. This means you will spend less time on research and trying to make connections and more time actually pitching your deal.

You can purchase an accredited investor list from either www.salesleads.tv or www.accreditedinvestorleads.com. When speaking with a representative let them know if you are looking for leads in a certain geographic area or any other qualifiers you need.

Before you call, make sure that your private placement is ready to go. It should be prepared in compliance with Regulation D and include an executive summary, financial information, a business plan, market analysis, competitive analysis, information on leaders and a term sheet. Be sure also to include disclosures and risk factors. It is impossible for every deal to go exactly as planned and market conditions can change with the wind so leaving out risk factors is unwise. When making calls, your pitch should be a summarized version of what is in your private placement. Give enough information for them to want to learn more, but not too much to bore them or give an information overload. Keep track of everyone you speak with and who gets copies of your private placement. Follow up with your accredited investor list and start to raise capital.

SEC Lifts 80 Year Ban on Private Offerings

The U.S. Securities and Exchange Commission Removes 80 Year Old Ban on Advertising for Private Offerings 

Great news for companies and investors!  After 80 years the SEC has finally lifted the ban on publicizing shares in private offerings.  This ban has made it extremely difficult for people without a black book to raise money.  Companies and their representatives have had to rely on verbal communication only, as any advertising could lead to a violation of Reg D.  Now after almost a century the SEC has finally lifted the ban in a 4-1 vote.  The new rule will take effect 60 days after the SEC publishes it in the Federal Register.

The SEC Lifted the Advertising Ban in Response to Pressure from Congress. 

When Congress passed the JOBS Act they asked the SEC to lift this ban as well.  The lack of being able to advertise caused most investors to miss the opportunity to invest in a private offering, simply because they wouldn’t hear about it until it was closed and had been announced.  Now companies will be able to more broadly advertise.  They still need to note that the offering is for Accredited Investors.

Now a Private Placement Memorandum can be advertised on YouTube, Facebook, Twitter, and other forms of social media along with Press Releases and a company website. 

Companies should still exercise caution in their advertisements to make sure they do not violate anything in Reg D, Rule 505, or Rule 506 and risk blowing their “safe harbor” protections under the Act.  It is recommended that all advertisements be ran by an attorney to ensure they do not open a company up for unexpected risk.

It is also rumored that the SEC will consider it a “best practice” to advertise on Dealbreaker.  While this has not been an official request, following an SEC best practice is always a good idea.  Companies can contact Dealbreaker and purchase ad space on their site.

The Private Offering Market, through Reg D, is $900 billion per year!  This is $857 billion more than the money raised through initial public offerings.

With companies using private placement memorandums to raise billions of dollars investors have been eager to participate.  By lifting this ban the less “connected” investors will have access to invest in private offerings early on.  This new ruling will indeed be beneficial for both companies and investors, with time telling how much additional capital is raised through the advertisement of private offerings.

By lifting the ban the SEC has effectively made private offerings as close as you can get to going public, without all of the pesky registration requirements.  If you are in the business of promoting private placements your job just got easier.  Remember to continue targeting Accredited Investors to stay in compliance.  You can always get an updated list from AccreditedInvestorLeads.com

 

 

JOBS Act & Accredited Investor Leads

Effect of JOBS Act on Demand for Accredited Investor Leads

What Will Be the Role of Accredited Investors in Private Investments?

As the different ramifications of the 2012 JOBS Act begin to sink in, some assumptions have been made regarding the future role of accredited investors with regard to private investments. The Act specifies rules that change Rule 506 of the Security and Exchange Commission’s Regulation D. Rule 506 provides a safe harbor for the offering and sale of certain private, unregistered securities. Previously, Rule 506 allowed unlimited private fundraising from an unlimited number of accredited investors – investors with $1 million in wealth or $200,000 income in each of the previous two years – and up to 35 non-accredited investors (assuming certain financial disclosures are met). The old Rule 506 also prohibited general solicitation or marketing of restricted securities to the public.

The new rules contained in the JOBS Act lifts the marketing prohibition on Rule 506 offerings. Rule 506, according to the SEC’s Division of Risk, Strategy and Financial Innovation, is already the most frequently used safe harbor rule within Reg D (the others being Rules 504 and 505), and this lifting of marketing restrictions will no doubt accelerate the move to Rule 506-based private placements. Some have speculated that the regulations will diminish the role of accredited investors in Rule 506 offerings because of the dropped ban on general advertising. However, this viewpoint overlooks the fact that fully 90 percent of Reg D offerings are composed entirely of accredited investors. In other words, most everyone who invests in a Reg D offering is accredited, and there is no reason to believe they will be crowded out in the future.

One reason why accredited investors will most likely continue to dominate the private placement market is that private companies prefer them:

  1. Accredited investors, who are by definition wealthy, can on average make larger purchases than can non-accredited ones.
  2. By favoring large investors, private firms can reduce the number of small investors, which means reducing the total number of investors.
  3. Reducing the number of different investors saves operational costs, increases privacy, and in general reduces the hassles of dealing with a lot of small investors.

Therefore, the demand for accredited investors is likely to remain robust even when the SEC roles out the final version of its new rules. SalesLeads.tv is the industry leader in the sale of accredited investor lead lists and is looking forward to the continuing opportunity of providing clients with the highest quality lists that are DNC and state-law compliant.

Eric Bank