Series 82 Cheat Sheet

Last revised: September 28, 2026

Compact FINRA Series 82 Cheat sheet covering private placements, exemptions, investor status, due diligence, suitability, communications, and core calculations.

Use the tables for a quick pre-exam check. Expand a topic’s notes for explanations, examples, and additional distinctions.

Scope and study context

The FINRA Series 82 — Private Securities Offerings Representative Qualification Examination is designed around the activities of a representative involved in private securities offerings. For review purposes, think in three layers:

Product and offering structure — equity, debt, convertible securities, private funds, valuation, capitalization, contingencies, use of proceeds.
Exempt offering rules — Securities Act registration vs. exemptions, Regulation D, private placement documentation, resale limits, general solicitation, accredited investor concepts, and restricted securities.
Broker-dealer conduct — communications, suitability/Reg BI, due diligence, supervision, AML, conflicts, books and records, customer protection, and anti-fraud rules.

This page is an independent Cheat Sheet. Use it to refresh decision rules before moving into topic drills, original practice questions, mock exams, and detailed explanations.

Series 82 Mental Model

Exam area	What to recognize quickly	Common trap
Private offering exemption	Why the securities are not registered and what conditions apply	“Exempt” does not mean exempt from antifraud rules
Investor qualification	Accredited investor, QIB, qualified purchaser, institutional account	These categories are not interchangeable
Solicitation limits	Whether general solicitation is allowed	Rule 506(b) and Rule 506(c) are often confused
Suitability / Reg BI	Whether the recommendation fits the customer and product risk	Accredited status alone does not make an investment suitable
Due diligence	Whether the firm had a reasonable basis to recommend the placement	Reliance on issuer statements alone may be inadequate
Communications	Whether materials are fair, balanced, approved, and consistent with the exemption	Advertising can destroy a private placement exemption
Offering documents	PPM, subscription agreement, investor questionnaire, term sheet	A term sheet is not a substitute for complete disclosure
FINRA conduct rules	Supervision, outside activities, compensation, AML, books and records	Private placement sales still occur inside a regulated BD framework

Core Securities Law Map

Law / rule set	Main purpose	Series 82 relevance
Securities Act of 1933	Registration of new issues; disclosure; offering exemptions	Private placements are usually primary offerings relying on an exemption
Securities Exchange Act of 1934	Broker-dealer regulation, secondary trading, antifraud, FINRA oversight	Broker-dealer and associated person conduct; Rule 10b-5
SEC Rule 10b-5	Antifraud rule for securities transactions	No material misstatements, omissions, manipulative schemes, or deceptive conduct
Regulation D	Safe harbor exemptions for private offerings	High-yield exam area: Rules 504, 506(b), 506(c), bad actor rules, Form D
Rule 144A	Resales to qualified institutional buyers	Institutional resale market; not the same as a Regulation D sale
Regulation S	Offshore offers and sales	Avoid directed selling efforts into the United States
State blue sky laws	State registration, notice filings, antifraud	Federal covered securities may avoid state registration but not state antifraud
Investment Company Act of 1940	Regulates investment companies; provides private fund exclusions	Private funds often rely on 3(c)(1) or 3(c)(7) exclusions
Investment Advisers Act of 1940	Regulates compensated investment advice	Private fund managers and advisory conflicts may appear in scenarios
Trust Indenture Act	Indenture protections for certain debt offerings	Public debt focus; many private debt placements are exempt
FINRA rules	Member firm and registered representative conduct	Suitability, communications, supervision, private placements, compensation, AML

Private Offering Exemption Selection

Exemption / structure	Typical use	Investor limits / conditions to know	Solicitation posture	Exam focus
Section 4(a)(2)	Statutory private placement by issuer	Transactions not involving a public offering; purchasers can evaluate and bear risk	No public offering	Broad principle; often supported by Reg D safe harbor
Regulation D Rule 504	Smaller exempt offerings	Aggregate offering cap and state-law conditions apply under current rules	Limited; depends on conditions	Less common than Rule 506 but testable
Regulation D Rule 506(b)	Traditional private placement	Unlimited accredited investors; limited number of sophisticated non-accredited investors	No general solicitation	Most tested private placement structure
Regulation D Rule 506(c)	Publicly solicited accredited-investor-only offering	All purchasers must be accredited investors; issuer must take reasonable verification steps	General solicitation allowed	Verification is the key distinction from 506(b)
Rule 144A	Institutional resale of restricted securities	Sales to QIBs	Institutional resale process	QIB status; resale, not issuer private placement safe harbor
Regulation S	Offshore offering	Offshore transaction; no directed selling efforts into U.S. market	Outside U.S.	Keeps foreign distribution separate from U.S. offering
Intrastate offering	Local issuer raising capital in one state	Issuer and purchasers tied to one state; resale restrictions apply	Local only	Out-of-state sales can break exemption
Regulation A	Exempt public offering alternative	SEC qualification and offering circular process	Public solicitation permitted	Not a classic private placement
Regulation Crowdfunding	Online exempt capital raising	Must use required intermediary framework	Public portal-based process	Do not treat as ordinary Reg D private placement

Regulation D High-Yield Distinctions

Feature	Rule 506(b)	Rule 506(c)
General solicitation	Not allowed	Allowed
Purchasers	Accredited investors plus limited sophisticated non-accredited investors	Accredited investors only
Accredited investor verification	Reasonable belief generally may rely on investor representations unless red flags	Issuer must take reasonable steps to verify
Disclosure to non-accredited investors	Required when non-accredited investors participate	Not applicable because all purchasers must be accredited
Offering amount	No SEC aggregate cap under the rule	No SEC aggregate cap under the rule
Bad actor disqualification	Applies	Applies
Common exam phrase	“Pre-existing substantive relationship”	“Public website/social media ads plus verification”

Notes and examples

Regulation D Process Points

Item	Practical rule
Form D	Notice filing with the SEC after first sale; not a registration statement
Bad actor disqualification	Covered disqualifying events can make Rule 506 unavailable
Integration	Multiple offerings may be analyzed together if they are really one plan of financing
Resale restrictions	Securities sold in Regulation D offerings are generally restricted securities
Non-accredited investors	Permitted only in some structures; sophistication and disclosure become critical
State law	Rule 506 securities are federal covered securities, but states retain antifraud authority and may require notices/fees

Regulation D Cheat Sheet

Regulation D provides common safe harbors for private offerings. The most tested distinction is usually between Rule 506(b) and Rule 506(c).

Feature	Rule 506(b)	Rule 506(c)
General solicitation	Not permitted	Permitted
Purchasers	Unlimited accredited investors; limited non-accredited sophisticated investors	All purchasers must be accredited investors
Verification	Investor self-certification may be used when reasonable	Issuer must take reasonable steps to verify accredited status
Offering size	No federal dollar cap under the rule	No federal dollar cap under the rule
Key trap	Public marketing can destroy 506(b) availability	Mere checkbox self-certification may be insufficient

Regulation D Decision Rules

Use this quick filter:

Was there public advertising, a public website, mass email, social media promotion, or open seminar?\
- If yes, think general solicitation.
- General solicitation is generally inconsistent with Rule 506(b).
- For Rule 506(c), all purchasers must be accredited and verification must be reasonable.
Were any non-accredited investors allowed?\
- Under Rule 506(b), a limited number may participate if sophistication and information standards are satisfied.
- Under Rule 506(c), non-accredited purchasers are not allowed.
Were resale restrictions disclosed?\
- Private placement securities are usually restricted.
- Investors should not be told they can freely resell unless an exemption or registration applies.
Did the firm perform diligence?\
- A broker-dealer recommending a private placement must have a reasonable basis.
- Accreditation alone does not prove suitability.

Other Exempt Offering Concepts

Concept	High-yield point
Section 4(a)(2)	Statutory exemption for transactions by an issuer not involving a public offering
Rule 504	Smaller Regulation D offering exemption; know generally that it differs from Rule 506
Form D	Notice filing associated with Regulation D offerings
State blue sky laws	Federal preemption may apply to some offerings, but notice filings, fees, and anti-fraud rules can still matter
Integration	Separate offerings may be treated as one if facts show a single plan of financing
Bad actor disqualification	Certain disciplinary or criminal events can disqualify participation in certain exempt offerings

Investor Status Reference

Category	What it means	Used for	Trap
Accredited investor	Investor meeting wealth, income, professional credential, entity, or institutional criteria under SEC rules	Regulation D offerings	Accredited does not equal suitable
Sophisticated investor	Investor has enough knowledge and experience to evaluate risks	506(b) non-accredited investor analysis	Sophisticated is not the same as accredited
Institutional account	Bank, savings and loan, insurance company, registered investment company/adviser, or other qualifying institutional customer under FINRA rules	Communications and institutional suitability	Institutional communication rules differ from retail rules
QIB	Qualified institutional buyer for Rule 144A	Institutional resale market	QIB is narrower and more institutional than accredited investor
Qualified purchaser	Higher-threshold investor category under Investment Company Act	3(c)(7) private funds	Not the same as accredited investor
Retail customer	Natural person or legal representative using a recommendation for personal, family, or household purposes	Regulation Best Interest	A wealthy individual can still be a retail customer

Private Fund Exclusions

Structure	Investor eligibility	Why it matters
3(c)(1) fund	Limited beneficial owner count; usually accredited investors in practice	Excluded from investment company registration if conditions are met
3(c)(7) fund	Qualified purchasers only	Allows a private fund with more sophisticated, higher-threshold investors
Hedge fund	Pooled investment vehicle using flexible strategies	Test suitability, liquidity, leverage, valuation, fees, conflicts
Private equity / venture fund	Long-term investments in private companies	Test capital calls, illiquidity, J-curve, exit risk, valuation uncertainty
Real estate private fund	Pooled real estate ownership or lending strategy	Test leverage, appraisal risk, tax allocations, income assumptions

Offering Document Reference

Document	Purpose	Exam points
Private placement memorandum / PPM	Main disclosure document	Business, risks, management, financials, use of proceeds, conflicts, fees, compensation, tax summary
Term sheet	Condensed summary of key terms	Must be consistent with full offering documents; not complete disclosure
Subscription agreement	Investor’s offer to purchase	Includes representations, investment intent, transfer restrictions, acknowledgments
Investor questionnaire	Collects investor status and suitability information	Accredited investor, QIB, qualified purchaser, risk tolerance, liquidity needs
Operating agreement / partnership agreement	Governs LLC or limited partnership	Voting, management, allocations, capital calls, transfer limits
Indenture / note purchase agreement	Debt investor rights	Covenants, collateral, maturity, default, trustee or agent provisions
Escrow agreement	Holds investor funds until conditions are met	Critical for contingency offerings
Side letter	Special rights for a particular investor	Creates conflicts and disclosure concerns
Engagement letter	Issuer and placement agent relationship	Compensation, role, indemnification, conflicts, scope of services

Private Placement Workflow

    flowchart TD
	    A[Issuer seeks capital] --> B[Select exemption and target investors]
	    B --> C[Due diligence on issuer and offering]
	    C --> D[Prepare PPM, term sheet, subscription docs]
	    D --> E[Principal approval and communication review]
	    E --> F{Solicitation allowed?}
	    F -->|506(b / private only| G[Contact qualified prospects through permitted channels]
	    F -->|506(c / public allowed| H[Use solicitation with accredited investor verification]
	    G --> I[Collect investor questionnaire and subscription agreement]
	    H --> I
	    I --> J[Suitability / Reg BI review]
	    J --> K[Issuer accepts subscriptions and closes]
	    K --> L[Form D, blue sky, FINRA filings if required]
	    L --> M[Post-closing records, confirmations, investor servicing]

Notes and examples

Private Placement Basics

A private placement is an offering not registered with the SEC, typically sold to a limited group of eligible or sophisticated investors under an exemption.

Parties and Roles

Party	Role	Exam focus
Issuer	Company or fund raising capital	Business plan, capitalization, financials, risks, use of proceeds
Placement agent	Broker-dealer helping sell securities	Due diligence, suitability, disclosures, communications, compensation
Investor	Purchaser of private securities	Qualification, risk tolerance, liquidity needs, concentration
Counsel	Drafts offering documents and exemption analysis	Legal structure, disclosures, transfer restrictions
Escrow agent	Holds funds in contingent offerings	Release only when stated conditions are met
Transfer agent / custodian	Records ownership or holds assets	Restrictions, recordkeeping, settlement support

Private Placement Documents

Document	Purpose	Trap
Private placement memorandum, or PPM	Main disclosure document for offering terms, risks, issuer, use of proceeds	It is not a registered prospectus and does not eliminate anti-fraud liability
Subscription agreement	Investor’s purchase agreement and representations	Investor representations do not replace suitability or due diligence
Investor questionnaire	Helps determine accredited/sophisticated status	Incomplete answers require follow-up
Term sheet	Summary of economics and structure	Must be consistent with full offering documents
Operating agreement / limited partnership agreement	Governs entity rights and obligations	Economic rights may differ from headline returns
Escrow agreement	Controls handling of investor funds in contingent offerings	Funds cannot be released before contingency is satisfied
Financial statements	Support issuer analysis	Unaudited or stale financials require caution and disclosure

Due Diligence Checklist

Area	Questions to ask	Red flags
Issuer business	What does the issuer do? How does it make money?	Vague business model, no operating history explanation
Management	Who controls the issuer? Relevant background?	Undisclosed disciplinary history, related-party dominance
Financials	Are statements current, reliable, and consistent?	Unexplained revenue jumps, going-concern issues, missing liabilities
Use of proceeds	How will investor funds be used?	Excessive offering expenses, insider payments, vague “working capital” use
Capitalization	Existing debt/equity, senior rights, dilution	Hidden preferred rights, convertible overhang, unpaid obligations
Valuation	How was price determined?	Unsupported projections, unrealistic comparables
Conflicts	Related-party transactions, compensation, side letters	Undisclosed fees, sponsor loans, preferential liquidity
Legal structure	Entity type, governing documents, investor rights	Transfer restrictions not explained, missing authority
Exemption	Why is registration not required?	General solicitation in a 506(b) offering
Investor funds	Escrow, contingency, closing mechanics	Funds released before minimum offering conditions are met
Ongoing reporting	What will investors receive after closing?	No reporting commitment or unclear valuation policy

Notes and examples

Due Diligence for Private Placements

FINRA expects broker-dealers to conduct a reasonable investigation when recommending private placements. The depth depends on facts and circumstances, but the representative should understand the investment before recommending it.

Due Diligence Checklist

Area	Questions to ask
Issuer business	What does the issuer do? Is the business model understandable and viable?
Management	Background, experience, disciplinary history, conflicts, compensation
Financial condition	Revenue, cash flow, debt, burn rate, going-concern risks
Use of proceeds	How will investor funds be used? Are fees and related-party payments disclosed?
Capitalization	Existing debt/equity, senior claims, dilution, convertible instruments
Valuation	Is the valuation supportable? What assumptions drive it?
Offering terms	Security type, rights, preferences, covenants, maturity, conversion, redemption
Risks	Liquidity, leverage, competition, regulatory, operational, market, execution
Legal structure	Entity type, governing documents, tax treatment, transfer limits
Conflicts	Issuer affiliates, related-party transactions, compensation, side arrangements
Contingencies	Minimum raise, escrow, investor cancellation rights if applicable
Exit strategy	IPO, sale, refinancing, redemption, secondary sale — realistic or speculative?

Diligence Traps

Issuer reputation is not diligence. A known sponsor can still offer a weak deal.
Third-party reports are not a substitute for review. The firm must assess reliability and relevance.
Financial projections require assumptions. Unsupported forecasts should not be repeated as likely outcomes.
Risk disclosure cannot be buried. Risks must be meaningful and understandable.
Diligence is ongoing. New material information before closing must be evaluated and, if necessary, disclosed.

Suitability and Regulation Best Interest

Obligation	Applies when	Core requirement	Private placement application
Reasonable-basis suitability	Firm or rep recommends a security	Understand product enough to believe it could be suitable for at least some investors	Requires product due diligence
Customer-specific suitability	Recommendation to a customer	Match recommendation to customer profile	Illiquidity, risk, concentration, time horizon, tax status
Quantitative suitability	Series of recommendations	Avoid excessive trading or strategy frequency	Less central for one-off placements but still relevant
Regulation Best Interest	Recommendation to retail customer	Act in retail customer’s best interest and not place firm/rep interest ahead of customer	Disclosure, care, conflicts, compliance obligations
Institutional suitability	Institutional customer scenario	Customer can independently evaluate risk and affirmatively exercises independent judgment	Do not assume all institutions waive suitability duties

Notes and examples

Suitability Factors for Private Placements

Factor	Why it matters
Net worth and liquidity	Private placements may be illiquid for years
Investment objective	Growth, income, speculation, preservation of capital differ sharply
Risk tolerance	Startups, private funds, subordinated debt, and real estate projects can lose principal
Time horizon	Exit may depend on sale, IPO, refinancing, fund wind-down, or maturity
Tax status	Pass-through income, K-1s, unrelated business taxable income, and state taxes may matter
Concentration	Private placements should be assessed against total portfolio exposure
Experience	Sophistication helps risk understanding but does not eliminate care obligations
Need for income	Distributions are not guaranteed unless legally fixed and funded
Leverage exposure	Borrowed money increases volatility and default risk
Transfer restrictions	Investor may be unable to sell when cash is needed

Communications and Solicitation

Communication issue	Rule of thumb	Exam trap
Retail communication	Written/electronic communication to more than 25 retail investors in a 30-calendar-day period	Usually requires principal approval before use
Correspondence	Written/electronic communication to 25 or fewer retail investors in a 30-calendar-day period	Still subject to supervision and content standards
Institutional communication	Communication only to institutional investors	Cannot be forwarded to retail investors without consequence
Fair and balanced standard	Risks must be presented along with benefits	Highlighting yield while burying illiquidity is problematic
Projections	Need reasonable basis, assumptions, and risk disclosure	Projections are not guarantees
Testimonials / endorsements	Must not be misleading and must disclose material conflicts where required	Paid promoter conflicts are high risk
Social media	Treated as communication	Public posts can be general solicitation
506(b) offering	Avoid public advertising and broad untargeted outreach	A website blast may defeat the exemption
506(c) offering	Public solicitation allowed if accredited investor verification is performed	Self-certification alone may be insufficient depending on facts

FINRA Private Placement Rules to Recognize

Rule / concept	Practical meaning
FINRA Rule 2010	High standards of commercial honor and just and equitable principles of trade
FINRA Rule 2020	No manipulative, deceptive, or fraudulent devices
FINRA Rule 2090	Know your customer
FINRA Rule 2111	Suitability
FINRA Rule 2210	Communications with the public
FINRA Rule 3110	Supervision and written supervisory procedures
FINRA Rule 3270	Outside business activities require notice to the firm
FINRA Rule 3280	Private securities transactions require prior written notice; compensation generally requires firm approval and supervision
FINRA Rule 3310	AML compliance program
FINRA Rule 4512	Customer account information
FINRA Rule 5122	Member private offerings; heightened disclosure and use-of-proceeds requirements
FINRA Rule 5123	Filing requirement for certain private placements sold by members
FINRA Rule 2040	Restrictions on paying transaction-based compensation to unregistered persons
SEC Rule 15c2-4	Customer funds in contingency offerings must be handled according to the contingency terms

Rule 5122 vs Rule 5123

Feature	Rule 5122	Rule 5123
Applies to	Private offering of a member firm’s or control entity’s own securities	Private placements sold by a FINRA member
Main concern	Conflicts when the firm or affiliate is issuer	FINRA visibility into private placement documents
Disclosure focus	Use of proceeds, offering expenses, selling compensation	PPM, term sheet, or other offering document filing
Filing concept	Filing with FINRA generally at or before first use of offering document	Filing generally within required period after first sale
Trap	Member cannot hide compensation or insider use of proceeds	Many exemptions exist, but do not assume every private placement is exempt

Customer Funds and Contingency Offerings

Offering type	Meaning	Handling concern
Best efforts	Placement agent tries to sell but does not guarantee amount raised	Investors need to know no firm commitment exists
Firm commitment	Underwriter purchases securities from issuer for resale	More common in public underwriting than private placement
All-or-none	Offering must raise full amount or fail	Funds should not be released unless condition met
Minimum-maximum	Offering can close after minimum is reached, up to maximum	Funds before minimum require careful escrow handling
Escrow	Third party holds investor funds	Protects investors until closing conditions are satisfied
Break escrow	Release funds to issuer	Only when disclosed conditions are met

Product and Security Type Reference

Security / product	Investor position	Key risks	Suitability focus
Common stock	Residual ownership	Highest loss priority; dilution; no guaranteed dividends	Growth/speculation; long horizon
Preferred stock	Senior to common; junior to debt	Deferral of dividends, call risk, limited upside	Income with equity risk
Convertible preferred	Preferred plus conversion feature	Dilution, conversion price, valuation uncertainty	Upside participation with complexity
Corporate note / bond	Creditor claim	Default, interest rate, subordination, liquidity	Income, credit risk tolerance
Secured debt	Debt backed by collateral	Collateral valuation and perfection risk	Downside protection analysis
Subordinated debt	Paid after senior creditors	Higher default severity	Higher yield vs higher risk
Limited partnership interest	Passive ownership with GP control	Illiquidity, capital calls, tax complexity	Suitable only if investor can bear illiquidity
LLC membership interest	Ownership under operating agreement	Governance, transfer limits, manager conflicts	Review operating agreement
Private REIT / real estate program	Real estate exposure	Valuation, leverage, distribution sustainability	Income assumptions and liquidity
Hedge fund interest	Pooled alternative strategy	Leverage, derivatives, shorting, lockups	Sophistication and concentration
Private equity / VC fund	Long-term private company portfolio	J-curve, capital calls, no near-term liquidity	Long time horizon and high risk capacity
DPP	Direct participation in business/tax results	K-1s, passive losses, sponsor conflicts	Tax and illiquidity fit

Debt Terms and Bond Math

Key Debt Terms

Term	Meaning	Exam angle
Par / face value	Amount due at maturity	Used for coupon and conversion calculations
Coupon rate	Stated annual interest rate on par	Coupon dollars = par x coupon rate
Current yield	Annual income divided by market price	Ignores maturity gain/loss
Yield to maturity	Approximate total return if held to maturity	Reflects coupon plus discount/premium amortization
Call provision	Issuer can redeem early	Creates reinvestment risk; caps upside
Put provision	Investor can require issuer to repurchase	Investor protection if issuer remains solvent
Covenant	Promise in debt agreement	Can restrict leverage, asset sales, dividends
Seniority	Payment priority	Senior secured debt has stronger claim than subordinated debt
Default	Failure to meet obligations	May accelerate debt or trigger remedies
Collateral	Assets pledged to secure debt	Value and legal perfection matter

Notes and examples

Core Formulas

\[ \text{Annual interest} = \text{Par value} \times \text{Coupon rate} \]\[ \text{Current yield} = \frac{\text{Annual interest}}{\text{Market price}} \]\[ \text{Approximate YTM} = \frac{\text{Annual interest} + \frac{\text{Par value} - \text{Price}}{\text{Years to maturity}}} {\frac{\text{Par value} + \text{Price}}{2}} \]\[ \text{Conversion ratio} = \frac{\text{Par value}}{\text{Conversion price}} \]\[ \text{Conversion value} = \text{Conversion ratio} \times \text{Common stock price} \]

Private Equity and Capitalization Math

Concept	Formula / rule	Use
Post-money valuation	Pre-money valuation + new investment	Value immediately after financing
Investor ownership	New investment / post-money valuation	Approximate new investor percentage
Price per share	Pre-money valuation / pre-money fully diluted shares	Financing share price
Enterprise value	Equity value + debt - cash	Values operating business regardless of capital structure
Equity value	Enterprise value - debt + cash	Value available to equity holders
EBITDA multiple	Enterprise value / EBITDA	Comparable-company valuation
Dilution	Reduction in ownership percentage after new issuance	Key risk in private equity financings
Liquidation preference	Preferred claim before common	Determines payout order on sale or liquidation

Example: Pre-Money / Post-Money

If a company has a pre-money valuation of 20 million and raises 5 million:

\[ \text{Post-money valuation} = 20{,}000{,}000 + 5{,}000{,}000 = 25{,}000{,}000 \]\[ \text{New investor ownership} = \frac{5{,}000{,}000}{25{,}000{,}000} = 20\% \]

Financial Statement and Ratio Review

Ratio / measure	Formula	What it tests
Working capital	Current assets - current liabilities	Short-term liquidity cushion
Current ratio	Current assets / current liabilities	Ability to meet short-term obligations
Quick ratio	Cash + marketable securities + receivables, divided by current liabilities	More conservative liquidity
Debt-to-equity	Total debt / total equity	Leverage
Interest coverage	EBIT / interest expense	Ability to service debt
Gross margin	Gross profit / revenue	Product profitability
Operating margin	Operating income / revenue	Operating efficiency
Net margin	Net income / revenue	Overall profitability
Return on assets	Net income / total assets	Asset productivity
Return on equity	Net income / shareholders’ equity	Equity profitability
Free cash flow	Operating cash flow - capital expenditures	Cash available after reinvestment
Burn rate	Cash spent per period	Startup runway analysis
Runway	Cash balance / burn rate	How long issuer can operate before needing more capital

Tax and Account-Type Concepts

Concept	Practical point	Exam trap
Interest income	Generally taxed as ordinary income unless a specific exemption applies	Private corporate debt is not tax-exempt municipal debt
Dividends	May be ordinary or qualified depending on facts	Distribution is not the same as guaranteed income
Capital gain / loss	Sale price minus tax basis	Illiquid securities may not have easy valuation or exit
Pass-through taxation	Partnership/LLC items flow to investor via K-1	Taxable income may occur without cash distribution
Passive activity rules	Loss deductibility may be limited	Tax benefits should not be the sole suitability basis
Depreciation / depletion	Noncash deductions in some DPPs	Tax assumptions must be supportable
UBTI	Tax-exempt accounts may owe tax on certain business income	Retirement account suitability issue
ERISA plans	Fiduciary and prohibited transaction concerns	Extra care with retirement plan investors

Resales, Restricted Securities, and Control Securities

Concept	Meaning	Exam angle
Restricted securities	Securities acquired in unregistered private offerings	Cannot be freely resold without registration or exemption
Control securities	Securities held by affiliates/control persons	Resale restrictions can apply even if securities were not restricted when acquired
Rule 144	Safe harbor for public resale of restricted/control securities if conditions are met	Holding period, current information, volume, manner-of-sale, notice concepts
Rule 144A	Resale to QIBs	Institutional resale market, not retail liquidity
Legend	Restrictive notation on certificate/book-entry	Signals transfer restrictions
Investment intent	Purchaser represents not buying with view to distribution	Important in private placements
Liquidity discount	Reduced value due to lack of marketability	Private securities may be hard to sell

AML, KYC, and Red Flags

Area	What to do	Red flags
Customer identification	Obtain and verify required identifying information	Refusal to provide ID; inconsistent information
Beneficial ownership	Understand legal entity ownership/control where required	Shell entities with opaque owners
Source of funds	Understand how investment is funded	Third-party wires; funds from high-risk jurisdictions
OFAC / sanctions	Screen against applicable sanctions lists	Name matches or geographic concerns
Suspicious activity	Escalate according to firm AML procedures	Rapid investment and redemption request; no business purpose
Private placement funding	Match investor, account, and subscription documents	Funds sent from unrelated party
Senior investors	Watch for exploitation or diminished capacity	Unusual urgency, new “helper,” inconsistent instructions
Cyber / email changes	Verify payment instruction changes	Last-minute wire changes by email

Representative Conduct Traps

Scenario	Correct analysis
Rep sells a friend’s startup shares away from the firm for compensation	Private securities transaction issue; prior written notice and firm approval/supervision generally required
Rep sits on issuer advisory board	Outside business activity and conflict disclosure issue
Issuer pays transaction-based compensation to an unregistered finder	Broker-dealer registration and compensation concern
Rep guarantees investor will receive distributions	Misleading communication and antifraud issue
Rep says “accredited means you can buy anything”	Wrong; suitability and Reg BI still apply
Rep forwards institutional deck to retail prospects	Communication classification and supervision issue
Rep changes PPM risk language to make sale easier	Material misstatement/omission and supervision issue
Rep receives undisclosed side compensation from issuer	Conflict, compensation, and potential fraud issue
Rep uses personal email for offering documents	Books and records / supervision issue
Rep ignores negative due diligence because issuer is a major client	Conflict and reasonable-basis suitability issue

High-Yield Distinction Table

Do not confuse	Correct distinction
Private offering vs private securities transaction	Series 82 covers private securities offerings; Rule 3280 governs associated-person securities activity outside regular employment
Accredited investor vs qualified purchaser	Qualified purchaser is generally a higher Investment Company Act category
Accredited investor vs QIB	QIB is used for Rule 144A institutional resales
Sophisticated investor vs accredited investor	Sophistication is knowledge/experience; accreditation is rule-based status
506(b) vs 506(c)	506(b): no general solicitation. 506(c): general solicitation allowed but accredited investor verification required
Exempt offering vs exempt security	Offering exemption avoids registration for that transaction; security may still be subject to resale limits
Disclosure vs suitability	Good disclosure does not make an unsuitable recommendation suitable
PPM vs subscription agreement	PPM discloses offering; subscription agreement is investor’s purchase contract
Best efforts vs firm commitment	Best efforts does not guarantee capital raise; firm commitment involves purchase by underwriter
Yield vs distribution rate	Yield is return measure; distribution may include return of capital and may not be sustainable
Senior debt vs preferred stock	Debt has creditor claim; preferred is equity and junior to debt
Liquidity event vs maturity	Equity exit depends on transaction; debt maturity is contractual but still subject to credit risk

Scenario Decision Guide

If the question says…	Think…
“Website advertisement for a private placement”	Is this 506(c)? If 506(b), general solicitation problem
“Investor is accredited but needs funds in six months”	Liquidity mismatch; likely unsuitable
“Issuer will release funds before minimum is reached”	Contingency offering / escrow problem
“No PPM, only oral statements”	Due diligence, disclosure, antifraud, supervision concerns
“Member firm is issuer”	Rule 5122 conflict and disclosure focus
“Private placement sold by member”	Rule 5123 filing analysis unless exempt
“Institutional-only resale”	Rule 144A / QIB analysis
“Foreign buyers outside U.S.”	Regulation S and no directed selling efforts
“Investor receives K-1”	Partnership/LLC/DPP pass-through tax issue
“Rep receives finder’s fee away from firm”	Outside activity / private securities transaction / compensation issue
“Guaranteed high return with no risk”	Misleading, promissory, antifraud violation
“Promoter has disciplinary history”	Bad actor, disclosure, due diligence issue

Final Review Checklist

Know the difference between Rule 506(b) and Rule 506(c) cold.
Treat accredited investor, QIB, qualified purchaser, and institutional account as separate categories.
Remember: private placements remain subject to antifraud, suitability, supervision, AML, and communications rules.
For every recommendation, ask: product risk, customer profile, liquidity, concentration, time horizon, and conflicts.
For every offering, ask: exemption, solicitation method, investor eligibility, disclosure, due diligence, funds handling, and required filings.
For every calculation, practice bond yield basics, conversion math, pre-money/post-money ownership, dilution, and core financial ratios.

Notes and examples

Final 24-Hour Review Checklist

Before a mock exam or final review session, make sure you can answer these quickly:

What makes an offering private rather than public?
What is the difference between Rule 506(b) and Rule 506(c)?
Why does general solicitation matter?
What is an accredited investor, and why is that not enough?
What due diligence should a placement agent perform?
What makes a private placement communication misleading?
What are restricted securities?
How do Rule 144 and Rule 144A differ?
What conflicts must be disclosed?
When does Reg BI apply?
What are the main signs of unsuitable concentration?
What should a representative do with suspicious customer funds?
Why can escrow not be released early in a contingent offering?
What is the difference between issuer exemption and broker-dealer registration?
What records support a defensible recommendation?

High-Yield Exam Map

Area	What to know cold	Common exam trap
Securities Act of 1933	Registration of new issues; exemptions; prospectus concepts; anti-fraud liability	Assuming an exemption from registration removes anti-fraud duties
Private placements	Section 4(a)(2), Regulation D, investor qualification, information access, resale restrictions	Confusing “private offering” with “freely tradable”
Regulation D	Rules 504, 506(b), 506(c), Form D, accredited investors, solicitation limits	Treating 506(b) and 506(c) as interchangeable
Due diligence	Reasonable investigation of issuer, management, financials, use of proceeds, risks, conflicts	Believing a placement agent may rely blindly on issuer statements
Communications	Fair and balanced content; no misleading projections; approval/recordkeeping	Calling PPM language “safe” if oral statements contradict it
Suitability / Reg BI	Reasonable-basis, customer-specific, quantitative suitability; retail best interest obligations	Focusing only on investor accreditation and ignoring investment fit
Resales	Restricted securities, Rule 144, Rule 144A, transfer restrictions	Assuming accredited investors can immediately resell privately placed securities
Anti-fraud	Material misstatements, omissions, manipulation, insider trading, conflicts	Omitting a material risk is as dangerous as misstating a fact
Broker-dealer rules	Registration, supervision, outside business, private securities transactions, compensation	Treating issuer exemption as a broker-dealer exemption
AML / KYC	Customer identification, suspicious activity, OFAC/sanctions screening, red flags	Accepting funds without resolving identity/source-of-funds concerns

Core Statutory Framework

Securities Act of 1933

The Securities Act of 1933 focuses on new issues and primary offerings. Its basic rule is simple: securities must be registered unless an exemption is available.

High-yield points:

Registration is about disclosure, not SEC approval of investment merit.
Exempt offerings are exempt from registration, not from anti-fraud rules.
A materially misleading private placement memorandum, pitch deck, term sheet, or oral sales statement can create liability.
Securities sold in private placements are often restricted securities.

Notes and examples

Securities Exchange Act of 1934

The Exchange Act focuses on secondary trading markets, broker-dealers, exchanges, reporting companies, manipulation, and anti-fraud rules.

Know the exam logic:

Concept	Review point
Broker-dealer registration	Firms and associated persons generally must be properly registered for securities activities
Rule 10b-5	Prohibits material misstatements, omissions, schemes to defraud, and deceptive practices
Manipulation	Includes improper trading, matched orders, wash sales, rumors, and artificial price activity
Insider trading	Trading or tipping while in possession of material nonpublic information can violate anti-fraud rules
Reporting issuers	Ongoing public reporting can affect resale rules, diligence, and available information

FINRA Conduct Rules

FINRA rules are central to exam questions involving sales practice, supervision, communications, compensation, and customer interactions.

Expect scenarios asking: What should the representative or firm do next?

Usually correct actions include:

Escalate to a supervisor or compliance.
Correct or withdraw misleading materials.
Obtain required approvals before use.
Document diligence and suitability analysis.
Disclose conflicts and compensation.
Refuse or delay suspicious transactions pending review.
Avoid guarantees, exaggerations, and unsupported predictions.

Accredited, Sophisticated, Qualified, and Institutional Investors

Private offering questions often test investor labels. Do not treat them as synonyms.

Investor label	Basic meaning	Trap
Accredited investor	Meets SEC-defined financial, professional, or entity criteria	Accredited does not automatically mean suitable
Sophisticated investor	Has knowledge and experience to evaluate merits and risks, or has a capable purchaser representative	Sophistication is not the same as net worth
Qualified institutional buyer, or QIB	Large institutional investor category used in Rule 144A resales	QIB is not the same as accredited investor
Qualified purchaser	Investment Company Act concept often relevant to 3(c)(7) private funds	Higher/different standard than accredited investor
Institutional account	FINRA communications/suitability category	Institutional status does not eliminate all duties

Notes and examples

Accredited Investor Review Points

Commonly tested accredited investor categories include:

Certain individuals meeting income or net worth standards.
Certain entities meeting asset or ownership standards.
Certain regulated financial institutions.
Certain knowledgeable employees of private funds.
Individuals with specified professional certifications or credentials recognized under SEC rules.
Certain family offices and family clients meeting required conditions.

Exam trap: if a question says an investor is accredited, ask the next question: Is the recommendation still suitable and in the customer’s best interest where applicable?

Private Offering Communication Rules

Private placement sales are communication-heavy: pitch books, PPMs, emails, calls, webinars, one-on-one meetings, term sheets, and data rooms.

FINRA Communication Categories

Category	General concept	Review point
Retail communication	Communication distributed or made available to more than a limited number of retail investors within a defined period	Often requires principal approval and must be fair and balanced
Correspondence	Communication to a limited number of retail investors	Subject to supervision and review procedures
Institutional communication	Communication only to institutional investors	Still must be fair, balanced, and not misleading

Notes and examples

Communication Musts

A compliant communication should:

Be fair and balanced.
Disclose material risks.
Avoid exaggerated or unwarranted claims.
Distinguish fact from opinion.
Avoid promissory language such as “guaranteed,” unless actually guaranteed by a capable guarantor and fully explained.
Present potential benefits with meaningful risks and limitations.
Use current and supportable data.
Disclose conflicts where material.
Avoid selective disclosure that makes the overall message misleading.

Common Communication Traps

Bad statement	Why it is a problem
“This private placement is SEC-approved.”	Registration or filing does not mean merit approval
“You can exit whenever you want.”	Private securities are often illiquid and transfer-restricted
“The issuer projects 20%; that is what investors should expect.”	Unsupported projections and promissory framing are misleading
“The PPM has all the risk disclosure, so the sales call can be more aggressive.”	Oral statements are also subject to anti-fraud standards
“Only accredited investors are receiving it, so advertising rules do not matter.”	Accredited status does not eliminate communication rules
“No commission is charged to the investor.”	Compensation may be paid by issuer and still create a conflict

Suitability, Reg BI, and Investor Fit

A private placement can be technically exempt and still be an unsuitable recommendation.

Suitability Framework

Type	Meaning	Example
Reasonable-basis suitability	The firm must understand the product and have a basis to believe it is suitable for at least some investors	Diligence on issuer, risks, valuation, liquidity, and structure
Customer-specific suitability	The recommendation must fit the particular customer	Concentration, liquidity needs, age, objectives, risk tolerance
Quantitative suitability	Series of transactions must not be excessive	Repeated illiquid private placements may overconcentrate a customer

Notes and examples

Reg BI Review

For retail customers, Regulation Best Interest requires broker-dealers and associated persons to act in the customer’s best interest when making a recommendation.

Remember the practical obligations:

Obligation	Exam meaning
Disclosure	Provide material facts about scope, fees, costs, conflicts, and capacity
Care	Understand the investment and have a reasonable basis for the recommendation
Conflict of interest	Identify, disclose, mitigate, or eliminate conflicts as required
Compliance	Firm must have policies and procedures reasonably designed for compliance

Private Placement Suitability Red Flags

A private placement is usually problematic for a customer who:

Needs liquidity soon.
Cannot tolerate loss of principal.
Does not understand restrictions and risks.
Is overconcentrated in speculative or illiquid investments.
Is relying on projected income for essential expenses.
Is purchasing primarily because of tax benefits without understanding economics.
Is pressured by scarcity claims such as “last chance” or “exclusive access.”
Has unresolved identity, funding source, or authorization issues.

Offering Structures and Contingencies

Best Efforts vs. Firm Commitment

Structure	Meaning	Series 82 review point
Best efforts	Broker-dealer uses reasonable efforts to sell but does not guarantee amount raised	Common in private placements
Firm commitment	Underwriter purchases securities from issuer and resells them	More typical of underwritten public offerings
All-or-none	Offering must sell entire amount or investor funds are returned	Escrow and contingency compliance matter
Minimum-maximum	Minimum must be reached before closing; sales may continue up to maximum	Do not release funds before minimum is satisfied
Part-or-none	Specified portion must be sold	Follow stated terms exactly

Escrow Trap

If an offering is contingent, investor funds generally must be handled according to the contingency and escrow terms. A representative should not suggest that a minimum has been met, or that funds can be released, unless the required condition is actually satisfied.

Securities Products in Private Offerings

Equity Securities

Security	Core feature	Investor risk
Common stock	Residual ownership; voting rights may vary	Highest claim risk; dilution; no required dividends
Preferred stock	Priority over common for dividends/liquidation; may be cumulative, convertible, callable	Interest-rate sensitivity, subordination to debt, issuer call risk
LLC or partnership interests	Ownership in private entity or fund	Illiquidity, tax complexity, governance limits
Warrants	Right to buy securities at set price	May expire worthless
Convertible preferred	Preferred security convertible into common	Conversion/dilution and valuation risk

Notes and examples

Debt Securities

Feature	Review point
Secured vs. unsecured	Secured debt has collateral; unsecured relies on issuer credit
Senior vs. subordinated	Senior debt has higher payment priority
Fixed vs. floating rate	Fixed rate has more interest-rate price sensitivity
Maturity	Longer maturity usually means greater interest-rate risk
Covenants	Restrictions or requirements intended to protect creditors
Call provision	Issuer may redeem early, often when rates fall or credit improves
Default	Failure to pay or comply with covenants can trigger remedies

Convertible Securities

Key concepts:

Conversion ratio determines how many shares the investor may receive.
Conversion price is the effective price at which conversion occurs.
Convertibles combine debt/preferred features with equity upside.
Investors face credit risk, equity risk, dilution risk, and complexity risk.

Useful formulas:

\[ \text{Conversion value} = \text{Conversion ratio} \times \text{Current common stock price} \]

Valuation and Capitalization

Private offerings often include valuation, ownership, and dilution questions.

\[ \text{Post-money valuation} = \text{Pre-money valuation} + \text{New investment} \]\[ \text{Investor ownership percentage} = \frac{\text{New investment}}{\text{Post-money valuation}} \]

High-yield trap: a headline ownership percentage may change after option pools, warrants, convertible notes, liquidation preferences, or future financing rounds.

Private Funds and Investment Company Concepts

Private offerings often involve pooled vehicles such as private equity funds, venture funds, real estate funds, hedge funds, or special purpose vehicles.

Common Private Fund Review Points

Concept	Meaning
Investment Company Act	Regulates investment companies unless an exclusion or exemption applies
3(c)(1) fund	Common private fund exclusion based on limited beneficial owners and non-public offering
3(c)(7) fund	Common private fund exclusion based on qualified purchasers and non-public offering
Adviser conflicts	Management fees, carried interest, allocation policies, side letters, affiliated transactions
Liquidity	Redemptions may be limited, suspended, or unavailable
Valuation	Hard-to-value assets create conflict and disclosure issues

Notes and examples

Fund Offering Traps

A fund interest is still a security.
A private fund exemption does not eliminate anti-fraud obligations.
Side letters can create conflicts or preferential rights.
Performance presentations must be accurate and not cherry-picked.
Management fees and incentive compensation affect investor returns.
Investor-level tax consequences may be complex and not suitable for all customers.

Resale Restrictions and Secondary Market Concepts

Private placement investors often want to know when they can sell. The safest exam answer is usually: do not promise liquidity unless a valid resale path exists.

Restricted Securities

Securities acquired in unregistered private offerings are often restricted. Resale may require:

Registration;
A resale exemption;
Compliance with holding periods and conditions;
Transfer agent approval or legal opinion;
Issuer consent or compliance with governing documents.

Notes and examples

Rule 144

Rule 144 provides a safe harbor for public resale of restricted and control securities if conditions are met.

Seller type	Review focus
Non-affiliate	Holding period and current public information concepts are key
Affiliate/control person	Additional limits may include volume, manner of sale, notice, and current information
Reporting issuer	Public information availability affects conditions
Non-reporting issuer	Longer and more restrictive resale analysis may apply

Trap: Rule 144 is a resale safe harbor, not the original private placement exemption.

Rule 144A

Rule 144A permits certain resales to qualified institutional buyers. It supports institutional private resale markets.

Exam reminders:

It is a resale rule, not the same as Regulation D.
It is generally institutional, not retail.
QIB status is not the same as accredited investor status.
Securities may still be illiquid compared with exchange-traded securities.

Anti-Fraud Rules and Material Information

Materiality

Information is material if a reasonable investor would consider it important in making an investment decision, or if it would significantly alter the total mix of information available.

Examples of potentially material information:

Misstated revenue, assets, liabilities, or cash flow.
Undisclosed related-party transactions.
Management disciplinary history.
Loss of major customer or supplier.
Use of proceeds inconsistent with disclosure.
Pending litigation or regulatory investigation.
Valuation assumptions with no reasonable basis.
Conflicts of interest or compensation arrangements.
Liquidity restrictions and lack of secondary market.

Notes and examples

Misstatement vs. Omission

Problem	Example
Misstatement	“The company is profitable” when it is not
Omission	Failing to mention the company will use proceeds to repay insider loans
Half-truth	Saying “revenue doubled” while omitting that losses tripled
Unsupported projection	Presenting aggressive growth assumptions as expected results
Conflict concealment	Not disclosing that the firm receives significant placement compensation

Insider Trading and MNPI

Material nonpublic information, or MNPI, must be handled carefully.

High-yield rules:

Do not trade while in possession of MNPI.
Do not tip others.
Follow information barrier procedures.
Escalate accidental receipt of MNPI.
Do not use confidential issuer information to solicit customers improperly.

Compensation, Conflicts, and Disclosures

Private placements frequently involve fees paid by the issuer, which can create conflicts even if the investor does not write a separate commission check.

Compensation Types

Compensation	Review issue
Placement fee	Must be disclosed where material; creates sales incentive
Selling concession	Compensation to selling broker-dealer or representative
Warrants or equity	Creates upside conflict and valuation concern
Expense reimbursement	Must be accurate and not disguise additional compensation
Management fee	Common in funds; reduces investor return
Carried interest / incentive allocation	Aligns with performance but can increase risk-taking incentives
Referral fee	May raise registration and disclosure issues

Notes and examples

Conflict Decision Rule

If the fact could reasonably influence the investor’s decision, disclose it clearly and escalate if unsure.

Common conflicts:

Firm has investment banking relationship with issuer.
Representative personally invests in the offering.
Firm or affiliate receives warrants.
Issuer uses proceeds to pay affiliates.
Fund manager values illiquid assets and receives performance fees.
Preferential terms are granted to selected investors.

Broker-Dealer Registration and Associated Person Issues

Registration Logic

A person receiving transaction-based compensation for securities solicitation generally raises broker-dealer registration concerns.

Series 82 candidates should distinguish:

Activity	Likely concern
Introducing investors for compensation	Broker-dealer registration issue
Soliciting purchases	Registration and supervision required
Giving investment recommendations	Suitability/Reg BI and registration implications
Marketing issuer securities while unregistered	Potential violation
Administrative support without solicitation	Less likely to be brokerage activity, but facts matter

Trap: an issuer’s ability to rely on a securities registration exemption does not automatically permit unregistered persons to sell the securities for compensation.

Private Securities Transactions and Outside Business Activities

Representatives must follow firm procedures before participating in securities transactions away from the firm or engaging in outside business activities.

Key points:

Provide required prior written notice.
Obtain approval when required.
Disclose compensation.
Do not sell away.
Do not route customers into off-platform deals without firm authorization.
Personal investments can still create conflicts.

AML, KYC, and Customer Onboarding

AML Program Concepts

Broker-dealers must maintain an anti-money laundering program. For exam purposes, focus on practical red flags and escalation.

Area	Review point
Customer Identification Program	Verify customer identity under firm procedures
Beneficial ownership	Understand ownership/control of legal entity customers as required by firm policy
Suspicious activity	Escalate unusual transactions, source-of-funds concerns, or inconsistent behavior
OFAC / sanctions	Screen against applicable sanctions lists under firm procedures
Recordkeeping	Maintain required identity and transaction records
No tipping off	Do not improperly alert a customer about suspicious activity reporting

Notes and examples

AML Red Flags in Private Placements

Investor refuses to provide identity documents.
Funds come from unrelated third parties.
Investor is unconcerned with risk or economics.
Investment is inconsistent with known financial profile.
Complex entity structure has no business purpose.
Investor seeks rapid redemption or transfer.
Customer is associated with high-risk jurisdictions or sanctioned parties.
Source of funds cannot be explained.

Correct exam response: pause, investigate under firm procedures, and escalate to AML/compliance.

Supervision, Books, and Records

Supervisory Duties

Broker-dealers must supervise associated persons and securities activities.

High-yield controls:

Written supervisory procedures.
Principal review and approval where required.
Communication review.
Product due diligence.
Training.
Exception reports.
Customer complaint handling.
Escalation procedures.
Record retention.

Records Often Relevant to Private Placements

Record	Why it matters
Offering documents	Evidence of disclosure and terms
Subscription agreements	Investor representations and purchase terms
Investor questionnaires	Qualification and suitability support
Communications	Emails, pitch decks, scripts, correspondence
Diligence files	Reasonable-basis support
Approval records	Supervisory review
Compensation records	Conflict and fee disclosure
Customer profile	Suitability and Reg BI analysis
Complaint files	Regulatory and supervisory review

Trap: if it was not documented, it may be difficult to prove that it was done.

Customer Accounts, Orders, and Funds

Private placement processing can be less standardized than exchange-traded securities, so procedures matter.

Customer Account Review

Before recommending or processing a purchase, confirm:

Customer identity.
Authority for the account.
Investment objectives.
Risk tolerance.
Time horizon.
Liquidity needs.
Financial condition.
Tax status if relevant.
Concentration in illiquid or speculative investments.
Understanding of restrictions and risks.

Handling Funds

Be especially careful with:

Checks made payable to the wrong party.
Funds sent directly to a representative.
Third-party wires.
Early release from escrow.
Customer requests inconsistent with offering documents.
Use of personal accounts.
Missing subscription documents.

Correct response: follow firm procedures and offering terms; escalate irregularities.

Common Series 82 Decision Points

506(b) or 506(c)?

Fact pattern	Likely answer
No advertising; pre-existing substantive relationship; accredited investors	506(b) may fit
Public website invites investors; social media promotion	General solicitation; think 506(c) if conditions met
Non-accredited but sophisticated investors included	506(b) issue; not 506(c)
All purchasers accredited but no reasonable verification after public solicitation	506(c) problem
Mass email to unknown investors	General solicitation concern

Notes and examples

Suitable or Unsuitable?

Fact pattern	Likely concern
Retired customer needs income and liquidity; product is speculative and locked up	Likely unsuitable
Accredited investor wants small allocation and understands illiquidity	May be suitable if diligence supports product
Customer wants 80% of net worth in one private fund	Concentration problem
Investor signs risk acknowledgment but cannot explain product	Documentation alone is not enough
Institutional investor has independent analysis capability	Duties still exist, but analysis differs from retail scenario

Disclosure or No Disclosure?

Disclose if the information is material, including:

Compensation.
Conflicts.
Illiquidity.
Transfer restrictions.
Use of proceeds.
Related-party transactions.
Financial weakness.
Fees and expenses.
Valuation methodology.
Sponsor disciplinary history.
Risks specific to the issuer or sector.

Escalate or Proceed?

Escalate when:

Investor information is inconsistent.
Offering documents appear misleading.
Management refuses diligence requests.
Funds come from unusual sources.
Public solicitation may have occurred in a 506(b) deal.
A representative wants to sell away.
A customer complains.
A material event occurs before closing.
A communication contains exaggerated claims.

Calculation Review

Current Yield

Current yield compares annual income to current market price.

\[ \text{Current yield} = \frac{\text{Annual interest or dividend}}{\text{Current market price}} \]

Exam trap: current yield does not include capital gain or loss at maturity.

Basic Bond Price Direction

Market change	Existing fixed-rate bond price
Interest rates rise	Price falls
Interest rates fall	Price rises
Credit quality worsens	Price usually falls
Call becomes more likely	Upside may be limited
Longer maturity	More interest-rate sensitivity
Lower coupon	More interest-rate sensitivity

Capitalization and Dilution

Concept	Meaning
Pre-money valuation	Value before new investment
Post-money valuation	Value after new investment
Dilution	Reduction in ownership percentage due to new issuance
Liquidation preference	Preferred investor priority before common equity
Fully diluted shares	Shares including options, warrants, and convertibles if exercised/converted

Quick trap: a 20% post-money ownership interest may not mean 20% of sale proceeds if preferred shares, debt, liquidation preferences, or participating rights exist.

Exam Traps to Memorize

“Accredited” Is Not the Final Answer

Accredited status helps with offering eligibility but does not answer:

Is the product suitable?
Is the recommendation in the customer’s best interest where applicable?
Is the customer overconcentrated?
Does the customer understand illiquidity?
Were conflicts disclosed?
Was due diligence performed?

Notes and examples

“Private” Does Not Mean “Unregulated”

Private offerings still involve:

Anti-fraud rules.
Broker-dealer registration.
FINRA communications rules.
Suitability and Reg BI.
AML obligations.
Books and records.
Supervision.
State anti-fraud rules.

“Filed” Does Not Mean “Approved”

A filing, notice, or disclosure document does not mean a regulator approved the investment’s merits.

“Risk Disclosure” Does Not Cure Everything

Risk factors help only if they are:

Accurate.
Complete.
Specific.
Prominent enough.
Not contradicted by sales statements.
Updated when material facts change.

“Issuer Says So” Is Not Enough

A placement agent should question:

Unsupported valuations.
Aggressive projections.
Missing financials.
Related-party transactions.
Disciplinary history.
Unclear use of proceeds.
Pressure to close quickly.
Refusal to provide diligence materials.

Fast Review Tables

Laws and Rules by Purpose

Law/rule area	Purpose
Securities Act of 1933	New issue registration, exemptions, disclosure, anti-fraud
Exchange Act of 1934	Broker-dealers, trading markets, reporting companies, anti-fraud
FINRA rules	Member firm conduct, supervision, communications, suitability
Regulation D	Private offering safe harbors
Rule 144	Public resale safe harbor for restricted/control securities
Rule 144A	Institutional resale safe harbor to QIBs
Regulation Best Interest	Best interest standard for retail recommendations
AML rules	Detect and prevent money laundering and suspicious activity

Notes and examples

Correct Action Verbs

When unsure, Series 82 questions often reward conservative compliance actions:

If you see…	Think…
Misleading pitch deck	Stop use, correct, escalate
Missing customer information	Obtain/update before recommendation
Suspicious funds	Escalate to AML/compliance
Undisclosed conflict	Disclose and supervise
Unapproved outside deal	Do not participate; notify firm
Material issuer change	Update disclosure; reassess recommendation
Customer complaint	Report under firm procedures
Public advertising in private deal	Analyze exemption impact
Non-accredited investor in 506(c)	Not permitted
Liquidity promise	Misleading unless valid and disclosed

Topic Drill Priorities

Use topic drills to test whether you can apply rules to scenarios, not merely define terms. Prioritize practice in this order:

Regulation D scenarios
Especially 506(b) vs. 506(c), general solicitation, accredited investors, and verification.
Suitability and Reg BI scenarios
Practice identifying when accreditation is insufficient.
Private placement due diligence
Focus on what the firm must investigate and when to escalate.
Communications and anti-fraud
Drill misleading statements, omissions, projections, and conflicts.
Resale restrictions
Separate original issuance exemptions from resale exemptions.
AML and supervision
Know when to stop, document, and escalate.
Product economics
Review equity, debt, convertibles, valuation, dilution, yield, and risk.

Put the review into practice

Finance Prep

Start Series 82 \u2014 Private Securities Offerings Representative Qualification Examination on Web

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