b'5. Understand How Securities Laws Apply to Yousecurities registration. There are federal and state securities exemptions from registration for securities offerings not made to the public (private offerings). This is where the term private placement originates. Qualification for an exemption generally will require you (as the issuer) to choose a specific exemption with the assistance of a qualified securities at-torney. Criteria that will help determine the appropriate exemption include: The location of the investment opportunityThe amount of money you want to raiseWill investors be from one or multiple states? Are there any non-U.S. persons?The financial qualifications of your investorsWhether you want to advertiseOnce you identify the appropriate exemption, you will need to strictly adhere to the rules of that exemption. The following chapter contains a more in-depth discussion of securities exemptions. If a securities agency investigates your companys offering (usually be-cause of an investor complaint), or you get sued by an investor, you will need to have the appropriate paper trail to prove you followed the rules for the exemption as part of the companys defense. Your securities attor-ney should help you to understand and comply with the rules of the ex-emption. The offering documents drafted by your attorney and evidence that you filed the appropriate notices will become critical in case you have to defend your actions later. Choice 3: Ignore Securities Laws at Your Peril Failure to follow securities laws puts all of your investors at risk. As the issuer, you could be subject to substantial civil and criminal penalties for the sale of unregistered securities if you dont carefully follow the rules of an exemption and document your compliance. Regulatory agencies or investors could force you to rescind your offer (and give everyones money back at a disadvantageous time), or you could spend investor funds hiring lawyers to defend charges or paying fines. An issuer who fails to comply with the law may be less likely to comply with the provisions contained in the contractual documents between him or her and the investors or may not understand his or her fiduciary obliga-tions to the investors. 43'