Private Placements: Where Issuers Actually Get Caught

The phrase “private placement” can create a dangerous misunderstanding. Private does not mean informal, unregulated, or outside the SEC’s attention.

A private placement is generally conducted under an exemption from securities registration. It is not an exemption from federal antifraud provisions—and it does not allow an issuer to disregard the specific conditions of the exemption it claims.

In this episode, securities attorney and former SEC enforcement attorney Frederick M. Lehrer explains where issuers commonly create problems when conducting private offerings under Regulation D.

Topics include:

• The differences between Rule 506(b) and Rule 506(c)
• General solicitation and general advertising restrictions
• Public promotion through social media, websites, podcasts, emails, and investor events
• Accredited-investor requirements and verification
• Why checking a box may not satisfy Rule 506(c)
• Conflicts between offering documents and management’s actual conduct
• Material omissions and inconsistent investor communications
• Financial projections and unsupported assumptions
• Unregistered finders and transaction-based compensation
• The purpose and limitations of Form D
• Federal and state notice-filing obligations
• Maintaining an organized compliance record

Rule 506(b) generally prohibits general solicitation and advertising. Rule 506(c) permits broad public solicitation, but every purchaser must be an accredited investor, and the issuer must take reasonable steps to verify that status.

Problems often arise when an issuer’s documents claim compliance with one exemption while its marketing, investor screening, disclosures, or compensation arrangements tell a different story. Merely inserting a rule number into offering documents does not establish the exemption. The company must actually satisfy the rule.

Private placements also remain subject to federal antifraud provisions. Materially false statements and misleading omissions may create liability whether they appear in a formal private placement memorandum, presentation, email, investor call, projection, or due-diligence response.

The central lesson: a private placement is not defined by secrecy or informality. It is defined by compliance with a specific exemption. Private capital can be raised lawfully and efficiently, but “private” should never be mistaken for “unregulated.”

This podcast is provided for general educational purposes only and does not constitute legal advice.

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Host Bio

Frederick M. Lehrer is a securities attorney and former enforcement attorney with the U.S. Securities and Exchange Commission. He advises companies on private placements, Regulation D offerings, Regulation A, going-public transactions, SEC filings and reporting, disclosure compliance, and responses to SEC comment letters.

Drawing on his experience inside the SEC and more than two decades in private practice, Lehrer helps issuers structure capital-raising transactions and prepare securities disclosures with an understanding of how regulators evaluate compliance, risk, and investor protection.

He hosts Inside Securities Law with Frederick M. Lehrer, an educational podcast examining the legal and regulatory issues companies encounter when raising capital, communicating with investors, making disclosures, and operating within the federal securities-law framework.