• It is very important that Investors participating in private placements take the time to evaluate their own SUITABILITY for what are generally higher risk investments having no opportunity for a secondary sale before the investment either matures or is otherwise redeemed by the issuer.
  • Major areas for consideration include:
    • ACCREDITED INVESTOR STATUS – For individuals this will involve the confidential disclosure of the investor’s assets and liabilities or their income for the past two years and the expected current year.  If an individual does not meet these standards or is unwilling to make a representation that their Rule 501 financial profile exceeds these standards, they will not be able to legally participate in a Regulation D offering, either under Rule 506(b) or Rule 506(c). 

For investors wishing to participate in Regulation D, 506(b) offerings, they may self verify that they meet one of the Rule 501 Accredited Investor standards (for individuals either the income test or the net worth test).

For investors wishing to participate in Regulation D, 506(c) offerings, they must provide creditable third-party verification for meeting one of the Rule 501 Accredited Investor standards (for individuals either the income test or the net worth test).

Accredited Investor Questionnaire


  • RISK TOLERANCE- While many private placements offer the chance for an Investor to achieve an attractive return on investment, each offering also has unique risks associated with it and the potential for a 100% loss of invested capital.  Private placement risks are generally greater than those associated with public securities and private placement investors must determine whether they can afford to sustain potential losses on their investments.  If a loss of principal is unacceptable to the Investor, they should not participate in private placements.

As a general rule, private placement investments should comprise a much smaller portion of the investors overall investment portfolio than would investments with more liquidity (i.e. a ready secondary market, such as publically registered security) and those issued by issuers with stronger credit quality (such as those rated “investment grade” by nationally recognized credit rating agencies)…typically less than 20% of the total liquid assets of the Investor. 

  • DIVERSITY - No single private investment should be too large.  Private placement investors should strive to diversify within this asset class allocation by making smaller investments in numerous private transactions, with the nominal investment amount determined relative tothe Investor’s overall investor liquidity (see Investment Considerations) 
  • ILLIQUIDITY – Every private placement is illiquid.  This means the Investor cannot sell the investment before it matures or is redeemed.  Investors should not have an imperative alternative use for the funds invested in a private placement.