What Is A Private Placement?
 
Both federal and Arizona law include an exemption from registration for offers and sales of securities that are made privately—are not made to the general public.  Both federal and Arizona law have “safe harbors” for private placements.  A safe harbor is a rule that specifies what you must do in order to be deemed to have complied with the statutory exemption. The federal law statute is section 4(2) of the Securities Act of 1933 and the safe harbor is Rule 506 of Regulation D. Arizona’s private placement statute is A.R.S. § 44-1844(A)(1) and the safe harbor is A.A.C. R14-4-126(F).
 
What constitutes a “private” rather than a “public” offering has been interpreted in numerous court opinions and by the regulatory agencies that enforce securities laws.  Self-education regarding private placements would be very time consuming and would require extensive reading of court opinions, regulatory actions, interpretative releases, and no-action letters issued by the Securities and Exchange Commission.  If you intend to make a private placement of securities, you must exercise great caution to comply with all of the requirements of the exemption. 
 
A very important component of a private placement is that you do not advertise to the general public. You cannot conduct general solicitation. Information about the offering on your web site constitutes general solicitation. Running an ad in a newspaper or on the radio constitutes general solicitation. Sending offering materials, brochures, letters, or advertisements to people you do not know may constitute general solicitation. If you engage in general solicitation, if you advertise your offering to the public, your offering will not qualify for the private placement exemption.
 
The Securities Division recommends that you consult with a securities attorney.  You may obtain an overview of private placements in:
 
Raising Capital 

SEC Release No. 33-4552 Nonpublic Offering Exemption

SEC Release No. 33-7233, Example 20

Agristar Global Networks, Ltd., SEC No-Action Letter

 

 

 

 Federal Securities Laws

 

The information provided on this web site is not comprehensive, is not offered as legal advice, and is not a substitute for competent legal counsel.  The Securities Division recommends that you consult with a securities attorney.

 

 

Arizona Statutes and Rules