Whenever presented with an investment opportunity, the Utah Division of Securities encourages investors to thoroughly research the investment beforehand. Whether a security is publicly traded or privately offered, the information a prospective investor should receive is substantial.
For publicly traded securities, information is generally either reported to the Securities and Exchange Commission (e.g. earnings reports for companies that issue stock) or disclosed to investors in writing (e.g. mutual fund prospectuses).
For private securities offerings, similar information needs to be disclosed to investors, but often there is little oversight to ensure that investors have been afforded proper disclosure. Investors seeking to invest in such offerings need to ensure that the company has provided them with adequate disclosure.
Private Securities Offerings
Detailed information about a private offering can be found in a private placement memorandum (PPM), private offering memorandum (POM), or some similar type of disclosure document. These documents should be substantial in length (on average 30-60 pages) and cover all aspects of the business and the investment in the business. While not an exhaustive list, some of the following information should be included in the disclosure document: how the offering complies with securities laws, the business model; where returns will be earned; risks of the business and the investment; biographical information on the managers; any derogatory information for the company or its managers such as bankruptcies, criminal records, or civil lawsuits; and the terms and conditions of investing.