In practice, most broker-dealer firms will require a PPM in order to have the offering approved for retail to their investor clients. A PPM must allow the broker-dealer to determine whether an investment is suitable for its investor client.

Is a PPM mandatory?

A PPM is not technically required for Rule 506(b) offers to only accredited investors and Rule 504 offers to either accredited or non-accredited investors. However, a PPM is usually advisable, even in those cases where it is not technically required. An issuer should view the PPM as a type of insurance.

What is a PPM used for?

PPMs are disclosure documents used by small businesses raising money through private securities transactions. A private placement memorandum (PPM) is a legal document provided to prospective investors when selling stock or another security in a business.