WHAT IS A PPM: It seems to be the trend these days when seeking investors to prepare a private placement memorandum to comply with Title 17 CFR 230.501 et seg commonly known as Regulation D of the SEC. This is a sound process as it provides the necessary disclosures to investors as to potential risk as well as possible gain from the film investment. Generally a ppm follows the preparation of a business plan. The plan discusses comparisons of the film with previously released films, potential box office returns, name of attached talent, executive summaries and the like. Many items in the plan are then also duplicated in the PPM thus providing full disclosure to the investor. Here is a summary of the rules governing the PPM as found in Reg D. Reg D is composed of various rules prescribing the qualifications needed to meet exemptions from registration requirements for the issuance of securities. Rule 501 of Reg D contains definitions that apply to the rest of Reg D. Rule 502 contains the general conditions that must be met to take advantage of the exemptions under Regulation D. Generally speaking, these conditions are (1) that all sales within a certain time period that are part of the same Reg D offering must be integrated, meaning they must be treated as one offering, (2) information and disclosures must be provided, (3) there must be no general solicitation, and (4) that the securities being sold contain restrictions on their resale. Rule 503 requires issuers to file a Form D with the SEC when they make an offering under Regulation D. In Rules 504 and 505, Regulation D implements §3(b) of the Securities Act of 1933 (also referred to as the 33 Act), which allows the SEC to exempt issuances of under $5,000,000 from registration. It also provides (in Rule 506) a safe harbor under §4(2) of the 33 Act (which says that non-public offerings are exempt from the registration requirement). In other words, if an issuer complies with the requirements of Rule 506, it can be assured that its offering is non-public, and thus that it is exempt from registration. Rule 507 penalizes issuers who do not file the Form D, as required by Rule 503. Rule 508 provides the guidelines under which the SEC enforces Regulation D against issuers. On April 5, 2012 President Obama signed into law the Jumpstart Our Business Startups Act, also known as the JOBS Act, which for the first time in over 80 years relaxes investment securities offering rules first enacted during the Great Depression.
Posted on: Fri, 10 Oct 2014 01:57:43 +0000
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