What is a Private Placement Memorandum (PPM)

. . . and what you can do about finders’ fees

A PPM is the starting point document for raising capital.

A private placement memorandum is a detailed and layered document. It is the document that governs the terms and conditions of the investment. It sets forth the compensation plan for the principals and the anticipated expenses of the offering, including marketing, legal and compliance. It is a key component of the Offering Documents Package that issuers use to solicit interest.

Pay someone to draft a rigorously professional PPM or preferably do it yourself. Investors will judge your investment opportunity on the quality of your Offering Documents Package, especially your PPM.

Nota bene: Many startups ignore most if not all Federal and state regulations and never have anything to worry about. No harm, no fault. If an investor has not lost money, a lawsuit can make him look greedy unless there was fraud.

But the problem with not complying with securities law is this: You have to return the investor’s money immediately and without other recourse if for any reason they want their money back. You can be penalized with both state and Federal fines and penalties and you can be deemed a “bad actor” by FINRA. Plus you will always have to include this unsavory information in future PPMs and Offering Packages.

“I was presented with a private placement memorandum (PPM) that looked very professional and had a quality marketing presentation. It identified my company as a sales agent for the exempt offering. In other words, it was my job to sell the deal and generate revenue to pay back the investors.”

This is taken from a letter to Private Placement Advisors from a client (solicited); It highlights the need to fully describe the marketing, legal and regulatory expenses associated with an offering under Rule 506(c or other JOBS Act exemption.

Every PPM must address the strictly enforced SEC rules and regulations covering finder’s fees. 

To learn more, listen to a very brief audiobook by Douglas Slain, BUSINESS BROKERS AND SECURITIES LAWS: HOW TO AVOID BECOMING AN UNLICENSED BROKER-DEALER. 

New incentive for borrowers interested in rehabilitating homes in Opportunity Zones.

Homebuyers seeking to purchase a home in a qualified Opportunity Zone can finance rehabilitation costs up to $50,000, an increase of $15,000 over the old rehab maximum amount of $35,000.

Existing homeowners with homes in Opportunity Zones can also use the larger allowable rehabilitation amount for financing to rehabilitate their existing homes. The program permits homebuyers and homeowners to finance rehabilitation costs with their mortgages to repair, improve, or upgrade their home, allowing them to pay for repairs or improvements.

Allowable improvements include connecting to public water and sewage systems, repairing or replacing plumbing, heating, air conditioning or electrical systems.

The new incentive will be limited to the first 15,000 mortgages secured by properties in Qualified Opportunity Zones each calendar year. The incentive will expire on December 31, 2028.

Listen to audiobooks in the Private Placement Handbook Series at amazon.com/author/privateplacementadvisors. 

Cannabis Crowdfunding – Three Insights

Everyone knows that the Federal government still treats marijuana as a Schedule I drug and that investors in cannabis businesses are 

arguably at risk. 

But what everyone does not know is that small investors are legally permitted to invest up to $2,000.Equity crowdfunding allows cannabis startups to raise seed capital from small investors in exchange for a share of the business.

Insight One, every cannabis company needs a bank account. Banks still do not like marijuana businesses. The crowdfunding platform 420fundme, for instance, was shut down for 30 days after all its banks declined to keep working with it.

Second insight, it is not always easy to invest in cannabis companies. Many if not most cannabis companies require small investors to be “qualified” or “accredited.” This provides legal cover for the cannabis companies but it also means that ordinary investors cannot invest in or sometimes not even hear about many cannabis opportunities.

Inight Three, read the rules. Make sure you understand the rules, state and Federal. Fail to fully comply and you will not be able to defend potential investors’ actions against you whether or not they invest. And if you do raise investor funds you will not be able to defend demands for immediate return of the money.

Compare Rule 506(b versus 506(ct no cost by calling 415-320-5496 or emailing [email protected]


May 30, 2019

REG CF (Regulation CF)was created under Title III of the JOBS Act.

This exemption gives smaller companies the ability to raise up to $1 million via the internet. Issuers may solicit either accredited or non-accredited investors with some limits on the amount any individual may commit to a Regulation CF offer.

Broker-Dealers do not have to register as funding portals and many already qualify to sell these securities. Some platforms offer Reg CF securities as broker-dealers and are already FINRA approved. Most platforms are also offering securities under Reg A+ and Reg D, especially Rule 506(c, to boost deal flow and drive revenue.

NextSeed is a debt only platform providing issuers an alternative to banks and online lending platforms while allowing smaller investors the chance to generate income.

FINRA-approved Reg CF crowdfunding portals:




Indiegogo / MicroVentures (First Democracy VC)



Open Deal (Republic)



DreamFunded Marketplace

Funding Wonder Crowd


GrowthFountain Capital


JumpStart Micro

Kasdaq (Mr. Crowd)


NetCapital Funding Portal

Not So Small Change (Small Change)

Razitall TruCrowd

. . . . . .

uFundingPortal was removed from the list when questions came up regarding transparency and deal quality.

Investors are coming from all 50 states. Most issuing companies are located on the coasts. Most companies have listed valuations in the range of $5 to $6 million.

Although Indiegogo entered the sector only recently, two of their offers (2 out of 4), BeatStars and Republic Restoratives have already hit their funding goal.

Some platforms are focusing on specific industry categories like Small Change for Real Estate and IndieCrowdFunder for entertainment/film.

Seed Rounds and Crowdfunding 

May 30, 2019

Seed Rounds and Crowdfunding

Startups and fast-growing businesses are increasingly turning to Crowdfunding exemptions to raise capital in Seed Rounds and Pre-Seed Rounds. They are relying on JOBS Act exemptions from SEC registration, primarily Regulation D, to make equity and debt offerings to accredited investors and non-accredited investors. And they are quickly learning how to use other exemptions created by the JOBS Act, especially Regulation S and Registration A.

➢ Q: What is a Pre-seed Round?

A: This is when the issuer and other founders if any are getting the company’s operations off the ground. This is time for a Friends-and-Family Round. No debt. Almost all the investors in early stage companies demand and receive part ownership. It is too early for promissory notes, except for some well-secured real estate deals, unless the investor insists on preferred convertible notes. Valuation is the rub. Valuation is seldom transparent. It is subjective, based on management, track record, market size, competition, risk and any number of things.

➢ Q: What is a Seed Round? A: Sometimes called the Early-Stage Round, this is when issuers hire a founding team to do market research, ancillary product development and market testing. This is also when the issuer decides what the final product or service is going to be and what the ideal demographic is going to be.

➢ Q: Who are Seed Round investors?

A: Seed Round capital sources include angel investors, private equity investors, and alternative class investors. Some issuers return to friends, family and associates at this stage.

➢ Q: What are the Crowdfunding exemptions?

A: Regulation D, using either or both Rule 506(c and Rule 506(b], is the most popular exemption.

Regulation S, for offerings to non-U.S. citizens, is becoming more popular as issuers discover some advantages over Regulation D, such as little regulatory oversight (especially in Malta and other favored offshore jurisdictions), no maximum raise, and no PPM (private placement memorandum) required.

Regulation A has two versions, one with a $20 million max, and the other a $50 million max. Regulation A is the exemption most similar to full registration with the SEC; therefore, compared to the other exemptions, particularly Regulation S, it is prohibitively expensive and time-intensive.

Practice Tip: Well-advised issuers are increasingly using separate Regulation D and Regulation S websites, one for domestic marketing and one for foreign marketing, offering the same assets.

➢ Q: What is the difference between 506(c and 506(b?

A: Rule 506(c allows an issuer to market to the public; Rule 506(b does not. Rule 506(b allows up to 35 non-accredited investors; Rule 506(c does not. The usual drill is to use 506(b to raise money from friends, family and associates. After all capital requirements have not been met, the issuer converts the 506(b offering into a 506(c offering.

History Factoid: To market securities to strangers, as now allowed under Rule 506(c, was illegal for over 8 decades. Today, issuers using Rule 506(c can do practically anything to go after both accredited or non-accredited investors; for instance last year a REIT used 506(c to raise capital from early-stage investors on Craigslist.

➢ Q: So why do any issuers use 506(b?

A: Issuers continue to use Rule 506(b because it allows up to 35 non-accredited investors. If you need family money and some members of the family are not accredited, you must use 506(b.

Practice Tip: An issuer can go from 506(b to 506(c but not from 506(c to 506(b.

➢ Q: What are Series A, B and C Rounds?

A: These rounds are for issuers with track records who have established a user base, have consistent revenue figures or enjoy other proofs of process. Most Series A Rounds raise between $15 million to $50 million. Series B and Series C Rounds usually raise more capital than that, sometimes much more. These rounds are when series 7 and other securities licensees take interest and when VCs and PE (private equity) funds do much of their investing.

Sometimes a single large investor will serve as the “anchor” (think COSTCO as the first tenant in a shopping center), drawing in other, more risk-adverse investors, in exchange for re-negotiated terms.

Most issuers never need Series A funding, let alone Series B or C funding. Their Pre-Seed and Seed Rounds have raised enough capital to enable them to avoid giving more equity.


Private Placement Advisors LLC designs and executes Pre-Seed and Seed Rounds using Crowdfunding (JOBS Act) exemptions. This is all we do. Schedule a free 20-minute consultation. We will listen to the company’s narrative, we will ask questions, and we will suggest one or more JOBS Act solutions. For specific suggestions on how Private Placement Advisors LLC may be able to help your company raise Seed and Pre-Seed capital, email [email protected]

General partnership for a specific purpose

Some real estate developers and others are able to avoid possible securities challenges by using a general partnerships for a specific purpose.

A general partnership for a specific purpose vehicle may allow borrowers to find interim or medium term financing without reliance on exemptions from Federal and state registration requirements. This strategy requires a lender who is willing to assume joint liability for your acts and omissions in the execution of the general partnership’s business, but only for those acts and omissions.

Learn more about how to use unregistered non-exempt private placements for real estate projects at www.privateplacementadvisors.com

Cannabis Securities

A security is created by any passive investment. If the investor assumes management duties, even if only part time, it is not a security. But when the investor completely relies on others, securities have been created.

Investors often have the right to give input on management decisions but they do not exercise this right. 

A cannabis startup may want to attempt to require all investors to be "member-managers."  This management structure is spelled out in the operating agreement. 

Here are some suggestions to help make your investors qualify as member-managers rather than passive investors.

  1.  An operating agreement that gives investors voting rights and a management role even if very limited.
  2. Requiring investors to serve on committees tasked with business operations
  3.  Investors negotiate at least some terms of the LLC agreement.
  4.  Investors receive and "approve" company reports.
  5.  Major decisions follow consultation with investors.

If your investors have a participatory role in management you do not have to worry about complying with regulations for  exempt offerings.  When choosing investors, you may want to try to find some with experience, however minimal, in the cannabis industry. But, as the number of your investors grows they will be more geographically diverse and it is more likely that they will be considered “passive.” 

At that point you will need to make the appropriate filings under one or more SEC exemptions, such as Rule 506(c. 

Cannabis businesses whose investors participate in the direction, control, or management of a business need to make sure that these investors can pass muster in the cannabis licensing process.

Both securities compliance and cannabis regulatory compliance are now very much in play these days. If investors lack management rights and are passive investors, securities compliance is required. If cannabis investors have management rights and are therefore “owners" they are de facto general partners not protected by securities laws. 



Cannabis Private Placement Templates

Each cannabis template includes a custom PPM, Subscription Agreement, Verification Letter(s) and Operating Agreement.

Template Package I: Dual Reg D & Reg S Offerings

Use this template if you want to use Regulation D to solicit citizens of the U.S., U.K., Canada and Australia while simultaneously using Regulation S to solicit non-U.S. citizens outside of the U.K., Canada or Australia.

Minimum $10,000 investment.

For up to 450 investors where the Regulation S offering is being made and up to 1,950 non-accredited investors and accredited investors overall.

Template Package II: Regulation S Offering

Use this template if you want to use Regulation S to offer up to 450 accredited and non-accredited non-U.S. citizens (including non-U.S. citizens living in the U.S.).

The exempt securities offered are convertible notes and common shares.

Minimum $100,000 investment.

Language appropriate for licensing organic brands, proprietary strains and related products as well as a "premium global consumer facing brand." 

Template Package III: Regulation D Offering

Use this template package if you want to use Regulation D to offer convertible debentures in the U.S., U.K., Canada and Australia.

For accredited, sophisticated and qualified non-accredited investors.

Minimum $5,000 investment

Language appropriate for cannabis retail goods, CBD personal care products and other products.



Our Blog

An ongoing series of informational entries

Regulation S Restrictions Calibrated to the Level of Risk

Under Rule 903 additional restrictions are calibrated to the level of risk that the Regulation S securities will flow back into the United States.

Rule 903 sets forth three categories of transactions.

Transactions by Category Category 1 transactions include offerings of securities by foreign issuers or, in the case of non-convertible debt securities, a U.S. issuer, in an “overseas directed offering.” There is no Category 1 distribution compliance period during which time the securities may not be resold.

Category 2 transactions include offerings of equity securities of a reporting foreign issuer; debt securities of a reporting U.S. or foreign issuer; and debt securities of a non-reporting foreign issuer. The Category 2 safe harbor is available even if there is a substantial U.S. market interest in the securities. Exempt category 2 debt securities include non-participating preferred stock and asset-backed securities.

Category 3 applies to all transactions not eligible for the Category 1 or Category 2 safe harbors. Category 3 transactions include debt or equity offerings by non-reporting U.S. issuers; equity offerings by U.S. reporting issuers; and equity offerings by non-reporting foreign issuers for which there is a substantial U.S. market interest.


Canadian issuers of cannabis private equity seeking access to U.S. capital must satisfy Regulation S under the JOBS Act.

Regulation S provides a safe harbor for securities in offshore transactions with no directed selling efforts in the U.S. The term “directed selling efforts” means anything could have the effect of “conditioning” the U.S. market for the offering. Any press releases or other publicity surrounding the cannabis offering must not be disseminated in the U.S. There must be a prominent legend on the securities saying that the offering is not available to U.S. citizens. Typically, U.S. investors are sought in the same time period.

This “cross-border offering” is actually two separate offerings marketed in parallel on both sides of the border. The SEC exemptions that cannabis offerings usually rely on for the U.S. portion of their cross-border offerings are Rule 506(b and Rule 506(c under Regulation D. With Rule 506(c private cannabis shares can be offered to anyone anywhere in almost any manner. A virtual Wild West for early stage capital, in early 2018 a REIT used Rule 506(c to raise capital on Craigslist. Issuers can indiscriminately solicit investors online and elsewhere for any legal service or deliverable.

Rule 506(b, sometimes referred to as the “Friends and Family Exemption,” permits the issuer to sell shares to 35 non-accredited investors as well as to any number of accredited investors. The downside is that Rule 506(b cannot be used if the issuer wants to solicit the public. As for re-sales, Rule 144A provides an exemption for QIBs (Qualified Institutional Buyers), which include U.S. insurance companies, investment companies, certain employee benefit plans, trusts, broker-dealers, and large banks.

A cannabis private placement (as well as any private equity transaction) can be followed by a resale to a QIB. For example, a fully underwritten cannabis offering could be sold to a syndicate of initial purchasers who in turn can sell shares to one or more QIBs.

Questions? Contact [email protected]

Why you should set up your shell company in the U.S. and not in a foreign tax haven.

First, all non-U.S. jurisdictions require you to upload an authorized copy of your passport’s picture page; many also require a banking reference and some will ask for a copy of a recent utility bill.

Second, U.S. banks have their hierarchy of domiciles they regard as trustworthy and places like Panama or some South Pacific island may not qualify.

What good is a shell company if you cannot use it?

What to do? Use Wyoming, Nevada or Delaware. Simple, cheap, easy.

According to a recent University of Cambridge study, “It is at least 3 times harder to establish an untraceable shell company in an offshore tax haven than in a developed country.”

Why even bother with shell companies?

Anonymity is a form of legal immunity and you cannot throw a shell company in jail.



Private Placements Review

Recent Form D filings of interest to cannabis investors

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This site is operated by Private Placement Advisors LLC (PPA) which is not a registered broker-dealer. PPA does not give investment advice, endorsement, analysis or recommendations with respect to any securities. The companies and the securities discussed here are being offered by, and all information included on this site is the responsibility of, the issuer of such securities. PPA has not taken any steps to verify the adequacy, accuracy or completeness of any information. Neither PPA nor any of its officers, directors, agents and employees makes any warranty, express or implied, of any kind whatsoever related to the adequacy, accuracy or completeness of any information on

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