Not every investment is suitable for every investor, and your stockbroker or investment adviser is held by certain rules that help ensure your money goes into investments that are right for you. Despite this, as FINRA lawyers, we can tell you that many investors are excited about high returns and promised low risk when it comes to private placements. A broker or investment adviser may make a private placement look inviting, but fail to explain how it works and the risks involved.
Brokers and investment advisers may push these risky or outright fraudulent private placements on the unsuspecting. Unfortunately, it’s the investors who end up suffering. Of course, not all private placement offerings constitute fraud, but you should be aware that even the most well-known are inherently risky and should be considered carefully before handing over your cash.
What Is a Private Placement?
A private placement is a non-public offering used to raise capital. An offering that is not a public offering is exempted under Regulation D of the Securities Act from SEC registration. These investments are often sold to “accredited investors” by various broker-dealers. Private placement investments are generally illiquid, meaning they cannot be readily sold and are not traded on the open market. Private placements are typically promissory notes, LLCs, or Limited Partnerships.Â
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What Are Potential Problems with Private Placements?
- They may lack transparency and liquidity.
- The investments can be hard to understand.
- Regulatory oversight may be slim for private placements.
- There’s a risk of investment fraud.
What Can I Do if I’ve Lost Money on an Unsuitable Private Placement?
Private placements are complicated investment tools involving sales of unregistered securities, which operate outside of the stock market. Small businesses often issue these securities as a method of raising capital. If you lost money investing in a private placement at the recommendation of a financial professional, it is in your best interest to talk to an experienced investment fraud attorney. Meyer Wilson sees these types of claims often, and we offer a completely free, no-pressure consultation so that you can learn about your rights to recovery.Â
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Recovering Losses Caused by Investment Misconduct.