Investor Experience

A private placement memorandum (PPM), or offering memorandum, is used by business owners of privately held companies to attract a specific group of outside investors. For these select investors, an offering memorandum is a way for them to understand the investment vehicle.

A PPM is essentially a thorough business plan including the investment opportunity and the potential risk factors to consider. In practice, these documents are a formality used to meet the requirements of securities regulators similar to prospectuses for publicly traded issues.

A subscription agreement defines the terms for an investor's application to join a limited partnership. It is a two-way guarantee between a company and a shareholder, or subscriber. The company agrees to sell a certain number of shares or units at a specific price and, in return, the subscriber promises to buy the shares or units at the predetermined price.

Rules for subscription agreements are generally defined in SEC Rule 506(b) and 506(c) of Regulation D allowing companies doing specific types of private placements to raise capital without needing to register the securities with the SEC.

A distribution generally refers to the disbursement of assets from a fund, account, or individual security to an investor. The income generated from an investment trust or real estate property is awarded to investors, typically as a monthly or quarterly distribution.