Call Now For a Free Consultation:
(614) 532-4576
Nationwide Representation

Are the Sales of Private Placements an Indication of Brokers Gone Bad?

The rise in sales of private stakes in companies is raising concerns among regulators and investors about investment fraud. The sale of private placements to investors, especially senior investors are popular among unethical brokers who are looking to increase personal profits.

Do Sales of Private Placements Indicate Fraud?

According to the Wall Street Journal, high-risk brokers are selling billions of dollars of private placements every year. In reviewing over one million regulatory records, the Journal found more than 100 firms where 10 to 60 percent of in-house brokers had three or more complaints from investors, regulatory actions, and/or criminal charges on their records. These brokerages sold more than $60 billion in private placements to investors.

According to market studies, sales of private placements are on the rise. In 2017, more than 1,200 securities firms sold approximately $710 billion of private placements. The first five months of 2018 are expected to top last year's record-setting numbers. Private placements can be stakes in oil companies, construction projects, real estate, high-tech companies, bio-tech research, and many other privately-held enterprises. They offer investors higher returns than publicly traded stocks and bonds, but limited company information creates a greater risk for financial losses.

With the rising numbers of lucrative sales of private placements, regulators are worried about high-risk brokers and brokerage firms looking to increase their profits. High commissions create strong motivations to sell, often without considering an investor's best interests. The Financial Industry Regulatory Authority (FINRA), a watchdog agency has expressed concerns about private placements. They are investigating broker markups and sales perks, how private placements are sold to investors, and whether the companies involved are legitimate businesses. Sophisticated and wealthy investors like insurers and hedge funds are often drawn to private placements as alternatives to publicly-traded stocks and bonds.

The Wall Street Journal states that high-risk brokers tend to flock to brokerages selling private placements. Reports show that unethical brokers with questionable tactics can make huge commissions on the sale of private placements at the expense of their clients who often suffer significant losses. Investors who suffer losses due to broker fraud and misconduct can often recover their investment principal, the expected gains (if money had been invested appropriately), arbitration costs, attorney's fees, and punitive damages for egregious misconduct. According to the SEC, private placements are considered unregistered offerings, and investors should be aware of fraudsters using unregistered offerings to conduct investment scams.

If you lost money because of an investment scam, broker misconduct, fraud, etc., contact Meyer Wilson today. Our securities fraud attorneys have secured more than $350 million in verdicts and settlements since we first opened our doors, and we will fight to secure the compensation you deserve. Call us at (614) 532-4576 today to speak with a member of our firm, or send us your information through our online form to schedule a free case consultation.

Related Posts:

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

Share This Story
If you found the information provided by this article useful, consider sharing to your social media channels to help others in their search for reliable resources.
Consult with Our Legal Team
There is never a cost associated with a consultation
Atlanta Office

945 East Paces Ferry Road, Suite 2275
Atlanta, GA 30326
Columbus Office

305 W. Nationwide Blvd
Columbus, OH 43215
Meyer Wilson
New Orleans Office

900 Camp Street 
Suite 337
New Orleans, LA 70130
Los Angeles Office

2029 Century Park East,
Suite 400N
Los Angeles, CA 90067
Cleveland Office

4781 Richmond Rd.
Suite 400
Warrensville Heights, OH 44128
Bloomfield Hills Office

41000 Woodward Ave.,
Suite 350
Bloomfield Hills, MI 48304
Quick Links
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient's state. Read More
The information contained in this Website is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Read More
chevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram