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Private Placement

“Private placement” is the term used in the securities world to define a non-public offering of an investment vehicle. Securities regulations allow exemption for selected types of private placements. The primary classifications for these exemptions are Rules 501-506 D. Smaller private offerings can be done where there are less than 35 investors and when the public is not solicited (e.g., friends and family rounds of financing). The most common types of private placements are those involving closely-held private companies. It is estimated that 75% of new businesses formed in the United States are funded through such private placements.

Private placement (or non-public offering) is a funding round of securities which are sold without an initial public offering, usually to a small number of chosen private investors. In the United States, although these placements are subject to the Securities Act of 1933, the securities offered do not have to be registered with the Securities and Exchange Commission if the issuance of the securities conforms to an exemption from registrations as set forth in the Securities Act of 1933 and SEC rules promulgated thereunder. Most private placements are offered under the Rules know as Regulation D. Private placements may typically consist of stocks, shares of common stock or preferred stock or other forms of membership interests, warrants or promissory notes (including convertible promissory notes), and purchasers are often institutional investors such as banks, insurance companies or pension funds.