The private capital markets have become an increasingly important source of funding for both private and public companies alike. Today total capital raised through private placements surpasses total capital raised in public offerings. What’s more, in recent years legislation like the JOBS Act has made a number of significant changes to laws and regulations governing private capital markets. Consequently, understanding the myriad private offering exemptions and how to properly conduct a private placement is crucial for not only for lawyers, but also for executives, managers, directors and anyone involved in corporate finance transactions. To listen to this webinar on-demand, go to: https://www.financialpoise.com/financial-poise-webinars/private-offering-exemptions-and-private-placements-2020/

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5. Disclaimer
The material in this webinar is for informational purposes only. It should not be considered
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6. Meet the Faculty
MODERATOR:
Vanessa Schoenthaler - Sugar Felsenthal Grais & Helsinger LLP
PANELISTS:
Alissa Parisi - K & L Gates LLP
Julia Vax - Arnold & Porter Kaye Scholer LLP
Craig Mordock - Sheppard, Mullin, Richter & Hampton LLP
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7. About This Webinar
Private Offering Exemptions and Private Placements
The private capital markets have become an increasingly important source of funding for both
private and public companies alike. Today total capital raised through private placements
surpasses total capital raised in public offerings. What’s more, in recent years legislation like
the JOBS Act has made a number of significant changes to laws and regulations governing
private capital markets. Consequently, understanding the myriad private offering exemptions
and how to properly conduct a private placement is crucial for not only for lawyers, but also
for executives, managers, directors and anyone involved in corporate finance transactions.
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8. About This Series
Securities Law Made Simple (Not Really)
The federal securities laws, made up of a interwoven collection of Congressional statutes,
rules and regulations promulgated by the Securities and Exchange Commission and federal
judicial precedent, play a ubiquitous role throughout a company’s life-cycle, relevant from the
first issuance of founder shares at organization, to the use of equity compensation to reward
and incentivize directors, employees and consultants, to offerings of equity and debt in
corporate finance transactions, to initial, secondary and alternative public offerings, in
mergers and acquisitions, strategic transactions and beyond. This webinar series of leading
securities law experts discusses both the fundamentals of the federal securities laws and the
latest developments in this ever-evolving area of law.
Each Financial Poise Webinar is delivered in Plain English, understandable to investors, business owners, and
executives without much background in these areas, yet is of primary value to attorneys, accountants, and other
seasoned professionals. Each episode brings you into engaging, sometimes humorous, conversations designed to
entertain as it teaches. Each episode in the series is designed to be viewed independently of the other episodes so that
participants will enhance their knowledge of this area whether they attend one, some, or all episodes.
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9. Episodes in this Series
#1: Securities Law: An Overview
Premiere date: 5/14/20
#2: Private Offering Exemptions and Private Placements
Premiere date: 6/4/20
#3: Public Company Reporting
Premiere date: 7/16/20
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10. Episode #2
Private Offering Exemptions and Private Placements
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11. What are Some of the Securities Laws that Come
Into Play When Conducting a Private Placement?
 Securities Act of 1933, as amended
 Requires that all offers and sales of securities either be registered with the
Securities and Exchange Commission or exempt from registration.
 Registration Exemptions
 There are two types of registration exemptions: exempt securities and exempt
transactions.
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12. What are Some of the Securities Laws that Come
Into Play When Conducting a Private Placement?
 Registration Exemptions
 Exempt securities: government and bank securities; commercial paper; securities
issued in bankruptcy; securities issued in exchange with existing holders; securities
issued pursuant to a fairness hearing; securities issued to persons within a single
state.
 Exempt transactions: transactions by an issuer not involving a public offering or
transactions by persons other than an issuer, underwriter or dealer.
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13. What are Some of the Securities Laws that Come
Into Play When Conducting a Private Placement?
 Traditional Private Placements
 Transactions by an issuer not involving a public offering - Section 4(a)(2) of the
Securities Act.
 Regulation D - safe harbor under Section 4(a)(2) most commonly used rules for
private placement transactions.
 Regulation S - rules for certain offshore offerings.
 Rule 701 - rules for employee/service provider equity incentive grants.
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14. What are Some of the Securities Laws that Come
Into Play When Conducting a Private Placement?
 JOBS Act of 2012 - Capital raising rules expansion
 Regulation A+ - an unregistered public offering.
 Crowdfunding - an exemption from registration under Section 4(a)(6) of Securities
Act.
 State (“Blue Sky”) Securities Laws
 National Markets Securities Improvement Act (NSMIA) preempts state law
registration requirements for many, but not all, federally-exempt transactions.
 Notice filings and filing fees may still apply.
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15. What Are Some Examples of Different Types of
Private Placements?
 Common Types of Private Placements
 Transactions in initial company formation
 “Friends & Family” financings
 Seed financings
 Venture capital financings
 Debt transactions
 PIPEs (private investment in public equity)
 144A offerings (typically offerings of debt securities)
 Stock issuances in acquisitions
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16. What Are Some Examples of Different Types of
Private Placements?
 Common Exemptions for Private Placements
 Section 4(a)(2) of the Securities Act.
 Regulation D safe harbor promulgated under Section 4(a)(2).
 Rule 506 – exclusively (or primarily) accredited investors.
 Rule 504 – up to $5 million in a 12 month period.
 Regulation A+ – effectively a “mini” registration.
 Regulation S – offshore offerings to non-US persons.
 Rule 701 – equity compensation plans.
 Section 3(a)(10) – exchanges approved in state fairness hearing.
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17. What is the Difference Between a 506(b) and 506(c)
Offering?
 First Difference – The Type of Investor that Can Purchase Securities
 In Rule 506(b) offerings, up to 35 non-accredited investors can participate.
 Non-accredited investors must be “sophisticated,” either alone, or with a
purchaser representative.
 Any non-accredited investors must receive a substantive disclosure document
that includes financial statements.
 In contrast, in Rule 506(c) offerings, non-accredited investors may not participate.
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18. What is the Difference Between a 506(b) and 506(c)
Offering?
 Second Difference – Standard of Verification Required of Accredited Investors
 In both Rule 506(b) and Rule 506(c) offerings, the issuer must have a reasonable
belief that the investor is accredited.
 In a Rule 506(c) offerings, the issuer also must take reasonable steps to verify
that all investors are in fact accredited.
 SEC provides a principles-based approach for determining what constitutes
“reasonable steps” as well as certain non-exclusive methods of verifying the
accredited investor status of natural persons.
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19. What is the Difference Between a 506(b) and 506(c)
Offering?
 Third Difference – Rule 506(c) Allows General Solicitation and General
Advertising
 Rule 506(c) permits issuers to communicate with investors and potential investors
through general solicitation and general advertising.
 In contrast, Rule 506(b) prohibits an issuer (or anyone acting on its behalf) from
offering or selling securities by means of any form of general solicitation or general
advertising.
 Must evaluate whether the benefits of Rule 506(c) -- the ability to engage in general
solicitation and advertising -- outweigh the additional complexities.
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20. What is a Substantive Pre-Existing Relationship?
 One way to demonstrate that the sale of a security is not the result of general solicitation
or general advertising is the existence of a substantive and pre-existing relationship
between the issuer and prospective investor.
 To be substantive, the relationship should involve a discussion of the prospective
investor’s financial goals and objectives, and one should examine the nature and
quality of the relationship.
 To be pre-existing, a relationship should be in place before the terms of the offering
are developed and the offering commences.
 Importance of SEC staff no-action letters and recent guidance.
 Not the exclusive means of demonstrating the absence of general solicitation or general
advertising.
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21. What is Regulation A+?
 Old Regulation A - Allowed exemption from registration for offerings less than $5
million in any 12-month period, required compliance with state securities laws.
 New “Regulation A+” - Mandated by the JOBS Act, allows exemption up to $50 million
in any 12-month period; rules for two-tiered offerings became effective on June 19,
2015.
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22. What is Regulation A+?
 New “Regulation A+”:
 Tier 1: offerings up to $20 million, including no more than $6 million of securities sold by
selling shareholders that are affiliates of the issuer, in any 12-month period.
 Tier 2: offerings up to $50 million, including no more than $15 million of securities sold by
selling shareholders that are affiliates of the issuer, in any 12-month period.
 Eligible companies: U.S. and Canadian, not publicly reporting.
 Eligible securities: equity securities, including warrants, debt securities, and securities
convertible or exchangeable into equity interests. Asset-backed securities are excluded.
 Process: file offering statements on Form 1-A via SEC’s EDGAR database; scaled
disclosure, subject to review by the SEC, must be qualified by SEC order prior to sales.
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23. What is Regulation A+?
 New “Regulation A+”:
 Ongoing reporting for Tier 2: ongoing, publicly filed, disclosures for Tier 2 offerings.
 State (“Blue Sky”) laws preemption: preemption of state securities laws only for Tier
2 offerings.
 Integration: Regulation A+ offerings will not be integrated with prior offer or sales
of securities, including any Regulation D offerings. Subsequent offers and sales of
securities will not be integrated if they are (i) registered under the Securities Act; (ii)
made pursuant to an employee benefit plan or under Rule 701; (iii) made pursuant
to Regulation S; (iv) made more than six months after the Regulation A+ offering;
and (v) crowdfunding transactions.
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24. What is Crowdfunding?
 Crowdfunding – Mandated by the JOBS Act, allows companies to raise capital through
small, individual contributions from a large number of people; final rules adopted on
October 30, 2015:
 Investment limits - companies: a maximum aggregate amount of $1 million in a 12-
month period.
 Investment limits - individual investors: in a 12-month period, across all crowdfunding
offerings, up to:
 If either their annual income or net worth is less than $100,000, then the greater of
$2,000 or 5% of the lesser of annual income or net worth.
 If both their annual income and net worth are equal to or more than $100,000, then
10% of the lesser of the annual income or net worth; and not to exceed $100,000.
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25. What is Crowdfunding?
 Portals: crowdfunding offerings must be made through brokers or funding portals, which
are subject to SEC registration requirements, certain obligations and prohibitions; must
conduct background and securities enforcement history checks on each issuer, officer,
director and 20% owner of the issuer to rule out any disqualifying event.
 Resale/holding period: securities purchased in a crowdfunding offering may not be
resold for a period of one year.
 Reporting/disclosure requirements: companies are required to file certain information
with the SEC and provide this information to investors and the relevant intermediary
facilitating the offering: offering documents and annual reports.
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26. What is Crowdfunding?
 Intrastate Crowdfunding – Section 3(a)11 of the Securities Act of 1933 provides a
registration exemption for securities sold to persons within a single state or territory by
an issuer incorporated and doing business within that state or territory.
 Amended Rule 147 and Rule147A provide safe harbors for qualifying intrastate
offerings.
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27. Who is an Accredited Investor? How Does Having a Non-
Accredited Investor Participation Impact an Offering?
 Rule 501(a) definition – key categories:
 Directors, executive officers and general partners of issuer.
 Individuals with a net worth in excess of $1 million (excluding their primary
residence).
 Individuals with income of $200k or more in last 2 years and with a reasonable
expectation of such income in the current year ($300k or more with their spouse).
 Rule 501(a) definition – key categories:
 Entities formed for purpose of investing – you must “look through” to the status of
the beneficial owners.
 “Reasonable belief” standard for issuers (but note difference in 506(c) offerings;
verification required).
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28. What is a Private Placement Memorandum? What Other
Documents and Materials Might be Required or Requested
by Investors when Conducting a Private Placement?
 Private Placement Memorandum
 Antifraud provisions of the federal securities laws require issuers to provide
investors with full, fair and complete disclosure of all material facts about the issuer,
its management, business, operations and finances.
 If an issuer’s offering will be sold to any non-accredited investors under Rule 506(b),
the issuer must provide the narrative and financial disclosures required by Rule
502(b)(2).
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29. What is a Private Placement Memorandum? What Other
Documents and Materials Might be Required or Requested
by Investors when Conducting a Private Placement?
 Private Placement Memorandum
 A private placement memorandum (“PPM”) is designed to fulfill the disclosure
requirements of Rule 502(b)(2).
 PPM can also serve as a shield against any future charges of violating the antifraud
provisions of the federal securities laws.
 The value of the PPM can be destroyed if the issuer, its placement agent or a broker
makes oral or written representations that are different from or inconsistent with
those in the PPM.
 Extent of disclosures in PPM will depend on the size of the offering.
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30. What is a Private Placement Memorandum? What Other
Documents and Materials Might be Required or Requested
by Investors when Conducting a Private Placement?
 Private Placement Memorandum
 Typical for PPM to include financial statements, description of the issuer’s business,
terms of the offering, risk factors that may affect the investment, description of
management, description of use of proceeds from the offering and subscription
procedures for the offering.
 While information delivery requirements are not required for accredited investors,
best practice is to provide the same information to both accredited and non-
accredited investors.
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31. What is a Private Placement Memorandum? What Other
Documents and Materials Might be Required or Requested
by Investors when Conducting a Private Placement?
 Other Documents
 The two key documents are:
 Investor Questionnaire. Developed to obtain certain information from
prospective investors and then serves as evidence of their required
sophistication level.
 Subscription Agreement. Contract between the investor and the issuer for the
purchase of the securities.
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32. About the Faculty
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33. Vanessa Schoenthaler - vschoenthaler@sfgh.com
Vanessa Schoenthaler is a partner in the New York office of Sugar Felsenthal Grais & Helsinger. She focuses
her practice on corporate and securities matters with an emphasis on private and public securities transactions,
compliance and disclosure obligations and corporate governance matters. Her clients rely on her deep
experience navigating the complexities of both the public and private securities regulatory environment.
Vanessa's corporate finance experience ranges from advising investors and development stage companies in
early round financings to representing issuers and intermediaries in registered and exempt offerings of equity
and debt securities. She has worked with foreign and domestic issuers on matters such as periodic and ongoing
disclosure obligations, corporate governance practices, exchange listing standards, joint ventures, equity
compensation arrangements, ESOP transactions and mergers, acquisitions and dispositions.
Vanessa counsels foreign and domestic sponsors, private funds and investment managers with regard to
formation and operation, investment adviser registration, and periodic and ongoing disclosure obligations. She
also guides her clients in structuring investments, compliance with regulatory requirements (including under
Section 13, Section 16 and Rule 144) and addressing insider trading issues.
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About The Faculty

34. Alissa Parisi - alissa.parisi@klgates.com
Alissa Parisi is a partner in K&L Gates’s Corporate/M&A practice group and resides in the Washington, DC
office. Ms. Parisi advises clients on a full range of corporate, securities, governance and compliance matters.
Ms. Parisi has significant experience in advising boards and executive management on complex business
and operational matters, including in the areas of risk assessment, implementation of governance initiatives
and alignment of corporate strategy to achieve corporate goals. She also acts as corporate counsel for
companies, advising on a host of general corporate matters, including fiduciary duties, management
transitions, relationships with shareholders and effective approaches to the changing regulatory environment.
Ms. Parisi advises companies on compliance matters relating to the SEC, NYSE, Nasdaq, state regulators
and other authorities. Her compliance experience includes preparing of SEC reports, advising with respect to
the timing and substance of disclosure of material events and counseling with respect to shareholder
meetings. Ms. Parisi also represents publicly and privately held entities in merger and acquisition
transactions. She has broad experience in representing clients in the structure, negotiation, diligence and
documentation of transactions ranging from several million dollars to several billion dollars. Ms. Parisi serves
as co-chair of the Women in the Profession Committee and the Associate Development Committee.
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About The Faculty

35. About The Faculty
Julia Vax - julia.vax@arnoldporter.com
Julia Vax focuses her practice on corporate and securities laws in representing emerging growth
and public companies, primarily in the life sciences and technology sectors, from formation and
early-stage capital raising to publicly traded entities. Ms. Vax has advised clients in the
biopharmaceutical, genomics, medical device, diagnostics, Internet and digital media, software, IP
telephony, telecommunications and financial services sectors in all aspects of their corporate
development and in connection with a broad range of financing and strategic transactions. Ms. Vax
has extensive experience in IPOs, Rule 144A transactions, shelf registrations, private placements,
including PIPE transactions and venture capital financings, as well as in executive compensation,
corporate governance and SEC reporting and compliance for public companies. She has been
involved in numerous public and private financing transactions representing companies, investors,
underwriters and placement agents. Ms. Vax is a faculty member at the Center for International
Legal Studies and has taught US corporate securities laws at the University of Tartu, Estonia,
School of Law, as a Visiting Professor in the Fall 2017.
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36. About The Faculty
Craig Mordock - CMordock@sheppardmullin.com
Craig Mordock is a partner at Sheppard Mullin, where he maintains a corporate and securities practice
with special on private and public securities offerings, corporate governance, and mergers and
acquisitions. His corporate finance experience ranges from representing venture capitalists, institutional
investors, and start-up companies in early-stage financings to representing issuers and investment banks
in public offerings of equity and debt securities. He advises purchasers and sellers of companies in a
variety of industries, including software, communications, semiconductors, life sciences, renewable
energy, consumer products, and financial services. Craig has extensive experience representing public
companies in connection with disclosure and compliance matters under the Securities Act of 1933 and
the Securities Exchange Act of 1934 and provides general corporate and business counseling to several
privately held companies. He regularly counsels boards of directors and board committees in connection
with their duties under state and federal law as well as their compliance with the rules of self-regulatory
organizations such as the New York Stock Exchange and NASDAQ. Craig has been a speaker at
numerous conferences on securities and corporate governance matters and has published articles on
various topics in these areas.
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37. Questions or Comments?
If you have any questions about this webinar that you did not get to ask during the live
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IMPORTANT NOTE: The material in this presentation is for general educational purposes
only. It has been prepared primarily for attorneys and accountants for use in the pursuit of
their continuing legal education and continuing professional education.
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38. About Financial Poise
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