Private placement refers to offering and selling shares in a company to a small group of buyers. The buyers are typically sophisticated investors such as banks, pension funds, mutual funds, insurance companies and very wealthy investors.In the United States, private placements are subject to Security and Exchange Commission regulation under the Securities and Exchange Act of 1933. But they generally do not have to be registered with the SEC if certain private placement offering requirements are met. These requirements are stipulated in an SEC rule called Regulation D. In fact, a private placement is sometimes referred to as a “Reg. D” offering. A private placement gives the issuing company more latitude in the disclosures it makes to potential investors. The theory behind this, as expressed in Reg. D, is that the purchasers are sophisticated investors who have the ability to do their due diligence when buying shares in a private placement. These types of investors come to the table with much more bargaining power than an average investor. Thus they have the ability to require the issuing company to provide the necessary financial information needed to assess the deal. As a result, these investors don’t need the protections the SEC provides to average, less sophisticated investors.