History

The Securities Act of 1933 required all securities sold in the United States to be registered with the Securities and Exchange Commission.  There were certain exemptions from registration, though.  One such exemption was contained in Section 4(2) of the '33 Act--the private offering exemption.


In 1982, the SEC adopted Reg D, which provides clearer guidance about how to conduct a private offering or private placement.


Unlike public offerings of securities, private placements don't require SEC registration and the ongoing expenses associated with being a public company.   All the anti-fraud provisions still apply, though, so full and fair disclosure of all material information to potential investors is the goal of the offering documents.


Almost invariably, a private placement memorandum ("PPM") is prepared to disclose all material information to potential investors.  This disclosure document typically contains sections devoted to the business plan, sources and uses of funds, offering expenses, biographies of the officers, and similar important information.  Once it is ready, and other due diligence matters satisfied, the capital raise can begin--without SEC registration.