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In addition, such placement of shares, if done by a private company, does not affect the share price as they are not listed publicly. However, for a publicly listed company, such securities distribution leads to a share price decline, at least in the near term.
FINRA Rule 5123 (Private Placements of Securities) requires firms to file with FINRA's Corporate Financing Department within 15 calendar days of the date of first sale of a private placement, a private placement memorandum, term sheet or other offering document, or indicate that no such offerings documents were used.
A private placement is an offering of unregistered securities to a limited pool of investors. In a private placement, a company sells shares of stock in the company or other interest in the company, such as warrants or bonds, in exchange for cash.
Technically, when raising funds under Regulation D or any other SEC exemption, there's no strict requirement to utilize a Private Placement Memorandum (PPM).
Whether you are forming a hedge fund, private equity fund, real estate investment group or you're raising money for your business, it's almost always smart to spend the time to create a custom PPM for your investors.