Offering Memorandum


DEFINITION of 'Offering Memorandum'

A legal document stating the objectives, risks and terms of investment involved with a private placement. This includes items such as the financial statements, management biographies, detailed description of the business, etc. An offering memorandum serves to provide buyers with information on the offering and to protect the sellers from the liability associated with selling unregistered securities.

Also known as a "private placement memorandum" (PPM).

BREAKING DOWN 'Offering Memorandum'

You can essentially think of the offering memorandum as a fancy business plan. In practice these are a formality to meet the requirements of securities regulators since most sophisticated investors perform their own extensive due diligence.

Offering memorandums are for private placements, while prospectuses are for publicly-traded issues.

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  1. What is required to become an accredited investor in a private placement?

    The term "accredited investors" is defined by the U.S. Securities and Exchange Commission (SEC) as individuals with a net ... Read Full Answer >>
  2. What is the difference between a summary prospectus and an offering memorandum?

    All securities offered to investors in the United States are required to comply with the anti-fraud provisions of federal ... Read Full Answer >>
  3. What factors might make a private placement a risky investment?

    Factors that make private placements risky investments include the potential loss of capital, a possibility of fraud associated ... Read Full Answer >>
  4. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  5. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  6. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>

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