Risk and compliance
Private placement memorandum
Also called PPM, offering memorandum.
A private placement memorandum is the disclosure document an EB-5 issuer gives an investor before subscription, setting out the deal terms, the people behind it, the fees taken out of the money and the ways the money can be lost, and since 2022 a regional center must file it with USCIS along with the rest of its offering documents.
What it decides
The RIA turned it into a filing item. Under 8 U.S.C. 1153(b)(5)(F)(i) a regional center must file an application for each investment offering before any investor files a petition on that offering, and (F)(i)(IV) requires that application to include all investment and offering documents, private placement memoranda named among them, on Form I-956F. Those documents must reference, as appropriate, all material investment risks, any conflicts of interest among the regional center, the new commercial enterprise, the job-creating entity and their principals, attorneys or promoters, any pending material litigation or bankruptcy and any material adverse judgment or bankruptcy order from the most recent ten year period, and the fees and other compensation paid to agents, finders and broker dealers. Securities law is looser: 17 CFR 230.502(b) makes an issuer furnish specified information only to purchasers who are not accredited, so in an all accredited Rule 506 deal the memorandum is practice rather than rule. Antifraud liability applies either way, and USCIS reads the memorandum against the business plan and the economic analysis filed with it.
Where this is explained properly
Pages here that go into private placement memorandum rather than mentioning it.
Related terms
- Form I-956FForm I-956F, Application for Approval of an Investment in a Commercial Enterprise, is the application a designated regional center must file for each particular investment offering before any investor may petition on that offering.
- Subscription agreementA subscription agreement is the contract by which an investor buys an interest in the new commercial enterprise, carrying the price, the investor's representations, the closing conditions and, where the offering uses one, the terms on which money leaves escrow.
- Operating agreementAn operating agreement is the contract that governs a limited liability company serving as the EB-5 new commercial enterprise, setting voting, management, distributions, transfers and redemption. A limited partnership uses a limited partnership agreement for the same purpose. Neither is defined by the EB-5 statute or regulations, but the immigration rules test what they say.
- Regulation D and Rule 506Regulation D is the Securities Act rule set whose Rule 506 lets an EB-5 issuer sell interests in the new commercial enterprise without registering them with the SEC, on conditions that fix who may buy, whether the deal may be advertised, and what the issuer must tell a purchaser who is not accredited.
- Securities attorneyA securities attorney is the lawyer who works on the EB-5 offering rather than the immigration petition, meaning the private placement memorandum, the subscription and operating agreements, and the exemption that lets the interests be sold without registration under section 5 of the Securities Act of 1933.
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