Private placements are almost the opposite of an initial public offering (IPO). Securities that are sold pursuant to an IPO are registered with the SEC to be sold to the general public. Private placements, conversely are unregistered and have a much more narrowed scope. They are not sold to the general public. Rather they are sold to individuals that must meet specific requirements in addition to FINRA’s general suitability rule of 2111. As a result of such limitations, they tend to be less liquid and thus, riskier than securities that are registered and publicly traded.
