Private placements – or offerings of a company’s securities not registered with the Securities and Exchange Commission (SEC) and not offered to the public – allow companies to raise billions of dollars each year. By selling private placements, companies – particularly small and startup businesses – profit from non-public offerings that are exempt from federal securities laws.
A risky, long-term investment, private placements have also come under scrutiny for recent fraud and sales practice abuses. As stated by the Financial Industry Regulatory Authority, INC. (FINRA) – the nation’s largest independent regulator of securities firms for investor protection – several firms and individuals throughout the country have been sanctioned for supplying investors with inaccurate or misleading private placement memoranda and sales materials, for omissions of information needed to make informed investment decisions, and for failing to adequately advise customers about the suitability of private placement investments.
In light of these reports of fraud and sales abuse, investors are being warned to be cautious about private placements, especially those with limited financial reporting and limited information about issuers and management. For both accredited and non-credited investors alike, private placements offerings can be dangerous.
For more information about the investor alert on private placement offerings, you can view the FINRA’s webpage or contact a Stuart securities arbitration lawyer from Crary Buchanan. Allow our legal team to review your case and inform you of your available options. We handle a wide range of investor claims and cases involving investment losses.