Tilden Moschetti: Not a week
goes by where I don't have a

consultation with a potential
new client, where I don't hear

something along the lines of I
didn't do a private placement

memorandum in my last three
syndications happened last week,

and I'm sure it'll happen this
next week as well. Let's talk

about it. Do you really need to
use a private placement

memorandum? What do I answer
these clients? And what do I

tell them? We're going to go
over that

my name is Tilden Moschetti. I
am a syndication attorney for

the Moschetti syndication Law
Group. So do you really need a

private placement memorandum?
Now granted, I'm biased in this

I prepare private placement
memorandums for a living. So

let's go over what exactly a
private placement memorandum

does first. So the private
placement memorandum or ppm, so

we're probably going to call it
PPM from now on is a document,

which is a set of details in
details out the investment

itself that's being made. It
details out all the risks that

are associated with that
investment, or everyone everyone

that we can reasonably think of,
we have no way for example of

predicting that Martians could
land on the planet and take

over. That's not one of the
risks that we would identify in

a private placement memorandum
more likely than not. But we do

identify risks such as we don't
know what the economy's going to

do in the next year, we don't
know what lending rates are

going to be and how that will
affect our business is such and

such, if they go up
substantially. We don't we

identify? Well, this is a risk
because these types of

investments are illiquid by
nature, we're not supposed to be

freely trading private
securities under Regulation D.

So those are the kinds of risks
that we generally talk about, we

also talk about conflicts of
interest, like the manager of

this fun, may have something to
gain from it, they're going to

be receiving management fees.
And perhaps it's a situation

where they will make more money
by having the investment go on

and on rather than end it when
it would make most sense for the

investors when we talk about
those sorts of conflicts of

interest that are inherent. But
we also talk about what the use

of the funds is. So we talked
about how the money is getting

used. So all these things go get
taken place in a private place

in memory in that ppm. So you
can think about a PPM also in

this context, and I like to
describe it this way. Because a

PPM isn't a marketing piece,
it's not a piece of marketing

material that you use, as you
know, as a to hold up and show

the world. It's it doesn't serve
that purpose. That's more

placement for your marketing
materials. The BPM is something

else. I like to think of it as
when you go to the bank, and you

open up a new checking account,
and they give you that big thick

booklet that you never look at,
you put it back in the folder

that they gave you. And you
never look at it again. Because

it's you know, who would read
that thing anyway, that in a lot

of senses is what the private
placement memorandum is. A lot

of people don't read private
placement memorandum they're not

read. So I have to live with the
fact that a lot of my work never

gets seen by anybody other than
my client, and they give it out

to people, but they probably
don't read it, maybe maybe 80%

of people don't look at them.
That's just my rough guess. So

why do we still need it? Well,
here's why you need to know

first off, you absolutely must
have a private placement

memorandum. If you are doing a
Regulation D rule 506 B

offering, the chance of a non
accredited investor entering

into your investment is very
high. And a non accredited

investors must get the
information that's within a

private placement. It's critical
that they see it that they have

that information. accredited
investors, interestingly enough,

aren't required to see that kind
of information. Now, you may

think to yourself, Well, I'm
doing a 506b offering, but I'm

only taking in accredited
investors. They've all told me

that well, that bar isn't really
quite right. Well, it's

interesting when we see
litigation coming a involving a

Regulation D offering, we
oftentimes say see this, this

this item in the case itself
where there was this many number

of investors this many assumed
to be non accredited investors

and then there's always there's
some larger number more of who

people will actually are non
accredited. So there's always

more non accredited investors in
a 506b than you think. Now we

don't have that in a Rule 506c
because everybody has to have

verification from a third party.
So most of the time, like 99% of

the time, you won't have any non
accredited investors. But they

still should see this
information. Why? Because it

answers that question. When the
investor calls you up and says,

Well, you never told me that the
that the economy was directly

tied to the performance of this
investment. You can show them

the PPM and say, This is where
we told you exactly that. Or

when they come to you and say
you are have been paying a

preferred return of 7%. But I
thought all along that it was

9%. Why didn't you tell me that
it was that? We're distributions

are happening annually, and
they're not quarterly? Like I

thought they were? Why didn't
you tell me that? If you don't

do a private placement
memorandum, I guarantee you're

going to get those questions, at
least, that's a concern for the

accredited investors. For the
non accredited, we're talking

big problem here, you must give
them a private place of memory.

So it answers all those
questions. And so it goes over

all those details. It's also
your backstop at the end of the

day, if you ever will come under
an investigation with the SEC,

you can present the PPM, you can
say this is what we told them.

And this is why it's there. This
is what happened. So not only is

it just a plain good idea, even
if you don't have to use one, it

is a really good idea because
it's insurance for you. Your

investors are probably the ones
paying for it. Most of the time,

my legal fees are reimbursed to
my sponsors to the syndicators

by their investors. So
essentially, the investors are

paying for your insurance
policy. So it's kind of a no

brainer to do it. Now, yes, it
does take a period of time. And

yes, it does cost money. But it
doesn't make sense to risk

everything on something that
basically you could get for

free. Not only that, but it does
make a case that you are a

professional, I can guarantee
you that Goldman Sachs, when

they go and they're doing a
private offering for one of

their clients, or one of their
subsidiaries is doing a private

offering, I can guarantee you
that they do not do a deal

without a private placement
memorandum. They don't they it's

a free guarantee for them, their
legal department would never let

them go out there. So you
showing up with your own ppm is

a mark that you're a
professional, that you know what

you're doing, that the investors
money is in safe hands because

you know enough to protect
yourself and you can probably

protect their money too. So
that's why even if you don't

have to use a private placement
memorandum, you're really really

sure. So here's the key
takeaways, private placement

memorandums, they provide that
detailed information about your

business, about the financial
health associated risks, all

those things which are crucial
for those potential investors to

invest with you. A PPM also
helps you comply with the

securities laws. It mitigates
any legal risks, and it enhances

investor protection, because it
promotes that clarity, that

understanding so they know what
they're getting into. They

understand what those investment
terms and conditions are. While

the ppm is require a lot do
require time and financial

investment up front. They offer
such advantages that it's a

clear case that you need to do
this. It is a clear way to

communicate exactly what your
what your offering does. And it

gives the strategy and it also
attracts those potential

investors because you show up
like a professional. My name is

Tilden Moschetti. I am a
syndication attorney with the

Moschetti syndication Law Group.
Obviously I do a lot of private

placement memorandums and I
would be happy to talk with you

about your private placement
memorandum for your next offering.