Yes. If you are seeking to raise investment money for your company, remember that one of the best things you can do to protect yourself is disclosing as much information about your company as possible. That way, if things fall apart and your investors threaten to sue you for securities fraud or the government brings a regulatory action against your company, you can use your disclosures in your defense.
One of the best ways to do this is in a Private Placement Memorandum, or PPM for short. So what’s a PPM?
A PPM is a disclosure document that includes relevant disclosures about your company that allow investors to weigh the risks involved with giving your company an investment. While many PPMs share similarities, they are all different due to uniqueness of each deal and the uniqueness of each investment. They should contain information on the business, financial information, legal structure and ownership information, and information related to the offering itself. It should also contain information stating that state securities regulations do not apply.
PPM’s are Worth the Investment
You should consider the PPM an insurance-type expense. The PPM can be used to thwart off frivolous claims from both investors and government regulators. It is not a foolproof defence by any means, but it makes it harder for a potential litigant to win a claim and it improves your defence.
A Private Offering Without a PPM Can Be Seen As a Red Flag
According to the SEC, a legitimate private offering will usually be described in a private placement memorandum, or PPM. Similarly, sloppy offering documents that contain typographical, spelling, or other errors can be a red flag that the investment could be a scam (https://www.sec.gov/oiea/investor-alerts-bulletins/ia_unregistered.html).