Private Placement Memorandum
Also known as: PPM, offering memorandum, disclosure document
Financial · EB-5 Glossary
Definition
A legal document provided to prospective EB-5 investors that discloses the material terms and risks of the investment. The PPM typically includes the business description, use of proceeds, risk factors, management team biographies, financial projections, and legal structure of the offering. PPMs are required under federal securities law for most EB-5 offerings.
Context
The PPM is the primary disclosure document investors should review during due diligence. Material misstatements or omissions in the PPM can be grounds for securities fraud claims.
More Financial Terms
- Capital
Cash, equipment, inventory, tangible property, cash equivalents, and indebtedness secured by assets owned by the investor, provided the investor is personally and primarily liable. Capital does not include assets acquired by unlawful means.
- Economic Impact Analysis
A formal study prepared by a qualified economist that quantifies the economic effects of an EB-5 project, including the number of direct, indirect, and induced jobs created. The analysis uses an accepted methodology (RIMS II or IMPLAN) and is a required component of the I-526E petition for regional center projects.
- Fund Administration
Under the RIA, regional centers must use a fund administrator to manage and hold EB-5 investor capital. The fund administrator serves as an independent custodian that controls the disbursement of investor funds according to the terms of the offering documents. This requirement was designed to prevent misuse of investor funds.
- Job-Creating Entity
The business entity that directly creates the jobs counted toward the EB-5 job creation requirement. In regional center projects with a two-entity structure, the JCE receives capital from the New Commercial Enterprise (NCE) and uses it to operate the business and hire employees.
- New Commercial Enterprise
The business entity in which the EB-5 investor places their capital. The NCE must be a lawful, for-profit entity established after November 29, 1990, or an existing entity that has been restructured or expanded. Qualifying entity types include corporations, partnerships, limited liability companies, joint ventures, and sole proprietorships.
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