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

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

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

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memorandum in my last three
syndications happened last week,

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

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

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

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tell them? We're going to go
over that

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

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

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

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I prepare private placement
memorandums for a living. So

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let's go over what exactly a
private placement memorandum

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

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

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which is a set of details in
details out the investment

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

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are associated with that
investment, or everyone everyone

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

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predicting that Martians could
land on the planet and take

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

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

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

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

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

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

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

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

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freely trading private
securities under Regulation D.

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

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also talk about conflicts of
interest, like the manager of

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

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

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

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

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investors when we talk about
those sorts of conflicts of

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

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

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

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

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

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

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

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

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placement for your marketing
materials. The BPM is something

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

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

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

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

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

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

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

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

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

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

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

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

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first off, you absolutely must
have a private placement

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

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offering, the chance of a non
accredited investor entering

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into your investment is very
high. And a non accredited

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investors must get the
information that's within a

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

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that information. accredited
investors, interestingly enough,

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

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

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

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

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interesting when we see
litigation coming a involving a

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Regulation D offering, we
oftentimes say see this, this

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

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of investors this many assumed
to be non accredited investors

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

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

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

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

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

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

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still should see this
information. Why? Because it

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

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

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

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

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

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

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

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

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

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do a private placement
memorandum, I guarantee you're

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

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

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

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

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

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

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

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

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

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

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

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my legal fees are reimbursed to
my sponsors to the syndicators

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by their investors. So
essentially, the investors are

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

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

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

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everything on something that
basically you could get for

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

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professional, I can guarantee
you that Goldman Sachs, when

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

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

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

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

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

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

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

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

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you know enough to protect
yourself and you can probably

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

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

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

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memorandums, they provide that
detailed information about your

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business, about the financial
health associated risks, all

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those things which are crucial
for those potential investors to

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

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

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investor protection, because it
promotes that clarity, that

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

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understand what those investment
terms and conditions are. While

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the ppm is require a lot do
require time and financial

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

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

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communicate exactly what your
what your offering does. And it

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gives the strategy and it also
attracts those potential

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

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Tilden Moschetti. I am a
syndication attorney with the

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

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placement memorandums and I
would be happy to talk with you

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about your private placement
memorandum for your next offering.