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Understanding Private Placement Solicitation Laws

private-placement-solicitation-investorsIf you can think of one place you DON’T want to be, I think most of us would agree it’s jail.  Waking up next to felons named Bubba and cold breakfast doesn’t sound appealing to me.  How about you?

Though it may sound extreme, one mistake during a conversation about private placement can lead to the infamous “knock on the door”. As with any other investment market, there are laws for brokering private placement, AND consequences for breaking them.

To help protect our readers, we have responded with an article covering solicitation laws, AND some key tips for brokering private placement.  This will allow you to work within the law, and aim for success the right way. First things first, let’s define the term “solicitation”, and how it applies to private placement investments.

Solicitation is defined as approaching an individual to promote an idea, business, service, or opportunity. In private placement, you are “soliciting” by quoting yields or approaching an investor before they have submitted a full compliance package. Since authorities are now looking for this type of activity, almost anything can be considered solicitation, hence the seriousness of this article.

Now that we’ve defined the term solicitation, let’s review some tips to help you avoid the legal hassle, and hit the jackpot.  Scroll down and take a look!

Solicitation Tips for Private Placement Brokers

1.  ALWAYS get the Compliance Documents:  Before you send details about private placement, or compliance documents, you must first have a formal request via email from the investor.  This email will prove that the investor requested the information from you, which makes it no longer a solicitation once you respond.  When sending out the compliance documents, make sure to include a Non-Solicitation Statement for the investor to complete.  After you have this document signed, and the initial email from the investor, you can prove you did not solicit them if needed.

2.  NEVER Guarantee Anything to Investors:  Let’s face it, less than 1% of the deals you work on have a chance of closing.  If you choose to think otherwise, and guarantee something that doesn’t perform, you can be in a lot of hot water.  If there is one word I would NEVER use in the private placement business, it is “guarantee”.  By doing so, you incur liability for something you have no control over.  Even if you are the trader, or have seen it work before, private placement investments rarely go as planned.

3.  Do NOT Sugarcoat Details to Investors:  If you paint a picture of unrealistic yields and no risk to the private placement investor, you are doomed for failure.  Not only are you setting yourself up for a BIG waste of time, but you are also risking your freedom. As the transaction evolves, the finger will always be pointed at you when the details don’t match up.  Even worse, if the transaction becomes a scam, it will look like you had a major part in it. Remember, most private placement investors have been through the ringer, and they know what sounds real and too good to be true.  Be the one broker that sounds confident and consistent, and eventually, the real investors will all come running back to you in the end.

4.  Use Disclaimers in ALL Communications:  When emailing anyone in the private placement business, it is always good to have a disclaimer below your signature.  It should state that you are NOT an investment advisor, and that NO information you provide should be considered a solicitation.   If you have this disclaimer below every email communication, as long as you are doing everything else legally, you will be protected.  Also, when speaking to an investor, it isn’t a bad idea to give “truthful disclaimers” here and there. This will protect you, while also helping you to establish more rapport with the investor.

5. NEVER Misrepresent Yourself to Investors:  When you misrepresent yourself or your experiences to others, you are breaking the law. Even if you are three brokers away from the trader, you should NEVER lie to get an application.  If your “trader” falls through, you will be stuck covering up your lies, and will have lost a good investor in the process. If you’re frustrated due to a lack of success, be more aggressive, and brokers will usually get out of the way.  Remember, honesty is safe and far more productive than deception.

Though it may be easier to paint a rosy picture for investors, the truth is always uncovered as the transaction unfolds.  No one appreciates the “bait and switch” technique, and as you know, ANYONE can file criminal complaints or sue you.  Remember, having a PPP investor submit an application is great, but NOT if they are expecting something you can’t provide.  Having applications that don’t close does nothing but degrade your reputation, and in such a fraud polluted business, that is all you really have.

In summary, if you have honest conversations outlining realistic expectations and worst case scenarios, you will ALWAYS be more productive in the end.  Keep it truthful, legal, short, and sweet, and you will surround yourself with people of similar ethics in return.

InsideTrade LLC Staff
Phone: (949) 444-2111


  • Adrian said:

    What is thi "private placement program"?

    How does it work?

    What is a compliance package?

    How can one qualified as an "Investor"?

  • Mr. A said:

    Contact me if you are an investing principal,

  • John said:

    Does anyone know of a genuine Trader that works within a bank

  • Andrei Topolnitchi said:

    Dear John, if you're still looking for traders, i may help you on that my friend.

    for further informations i can be reached at:

    skype: andrei.topolnitchi
    phone: 3736-297-428

  • Daryl Crabtree said:

    Does a post on LinkedIn outlining an opportunity constitute solicitation?

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