How to Use This Quick Reference
This independent Quick Reference is for candidates preparing for FINRA’s Series 82 — Private Securities Offerings Representative Qualification Examination, exam code Series 82. Focus on applied decisions: whether an offering exemption fits, whether a communication is permitted, whether a recommendation is suitable, and whether a representative or firm has handled disclosures, filings, conflicts, and customer obligations correctly.
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” |
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 |
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]
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 |
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 |
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 |
\[
\text{Annual interest} = \text{Par value} \times \text{Coupon rate}
\]\[
\text{Current yield} = \frac{\text{Annual interest}}{\text{Market price}}
\]\[
\text{Approximate YTM} =
\frac{\text{Annual interest} + \frac{\text{Par value} - \text{Price}}{\text{Years to maturity}}}
{\frac{\text{Par value} + \text{Price}}{2}}
\]\[
\text{Conversion ratio} = \frac{\text{Par value}}{\text{Conversion price}}
\]\[
\text{Conversion value} = \text{Conversion ratio} \times \text{Common stock price}
\]
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.
Practical Next Step
Use this Quick Reference to build a short error log while you practice: for each missed Series 82 question, tag it as exemption, investor status, suitability, communications, due diligence, FINRA rule, or calculation, then drill that category until the decision rule is automatic.