private placement investment

Lose Money in a Private Placement Investment?

Jul 20, 2020

Private Placements are Risky  As an individual investor, you may be offered an opportunity to invest in an unregistered offering or private placement. You may be told that you are being given an exclusive opportunity. You may have seen an advertisement regarding the opportunity. The securities involved may be, among other things, common or preferred stock, a REIT, a limited partnership, a membership interest in a limited liability company, or an investment product such as a note or bond. Private securities offerings are generally limited by law to certain institutional and high net worth investors called “accredited investors”. This limitation exists because of the greater risks involved in private offerings as compared to, for example, investing in a publicly-traded stock. Keep in mind that private placements can be very risky and any investment may be difficult, if not virtually impossible to sell.     A private placement is a securities offering that is exempt from registration with the SEC, and is also referred to as an “unregistered offering.” For the most part, private placements are not subject to some of the laws and regulations that are designed to protect investors, such as the comprehensive disclosure requirements that apply to registered offerings. Private and public companies engage in private placements to raise funds from investors. Hedge funds and other private funds also engage in private placements.  How do I know if I Bought a Private Placement or Unregistered Security? Unregistered offerings often can be identified by capitalized legends placed on the offering documents and on the certificates or other instruments that represent the securities. The legends will state that the offering has not been registered with the SEC and the securities have restrictions on their transfer. You should read the offering documents carefully to understand the risks involved, and the broker must make fair and balanced communications to you when  Earlier this month, the Financial Industry Regulatory Authority (“FINRA”) issued guidance to brokerage firms on communicating with retail customers about private placement offerings. It found that there were problems with the way firms communicated the risks of private placements to their retail customers making those communications misleading.  Private Placement Retail Communications Due to the fact that many brokers were not providing complete information on the risks of private placements when communicating with investors, FINRA provided guidance to brokers focused on disclosures regarding risk to the retail investor. The new guidance notes that in FINRA’s recent reviews of retail communications concerning private placement offerings found certain deficiencies including the failure of member firms to balance claims of potential investment benefits with the disclosure of risks.  FINRA reminded the brokers that  Rule 2210(d)(1) requires the following: 1. That all member firm communications be fair, balanced, and not misleading. 2. Communications that promote the potential rewards of investment also must disclose the associated risks in a balanced manner. 3. Communications must be accurate and provide a sound basis to evaluate the facts with respect to the products or services discussed. 4. It prohibits false, misleading, or promissory statements or claims, as well as and the publication, circulation, or distribution of communication that a member firm knows […]

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Investment losses

Can I Sue My Financial Advisor for Investment Losses?

Mar 16, 2020

We are currently in a phase of massive market fluctuation. As is clear now, if it was not apparent before, the market is highly sensitive to world affairs, political changes, and global crises. The collective emotions surrounding the current worldwide Coronavirus pandemic, and the response from government and international agencies around the world, is certainly being reflected in the financial markets. That is, of course, the risk you take when investing your money in the market. However, remember that you are taking a calculated risk.   Expected Market Risk vs. Unexpected Fraud or Mismanagement by a Financial Advisor You know, as all investors know on some level, that the long-term financial returns of investing in the market typically outweigh any short-term losses. But there is always some risk involved. That is why it is good practice to invest regularly, try to have your financial advisor balance your portfolio so you can hedge some of your bets against an economic downturn, and try to manage your stress and concern during major market volatility of the kind that we are currently experiencing due to the Coronavirus.  All that being said, the kind of risk we do not account for is when your financial advisor does something that is not in your best interest, and/or when your broker or advisor puts their interests above yours. That is not the ordinary, to-be-expected, kind of investment risk. Rather, that is a wrongful act on the part of your broker or financial advisor for which you can obtain damages through a lawsuit or arbitration.   So, the short answer to the question, “Can I sue my financial advisor for investment losses?” is “Yes.” In this article, we will discuss the reasons for using your broker or financial advisor, and the mechanics of how to get your “day in court” when you are the victim of investment fraud, negligence or mismanagement.   If, after reading this article, you have additional questions on any investment fraud matters, we invite you to contact investment loss attorney Melanie Cherdack. Ms. Cherdack is an investment loss attorney who understands the plight of those who were victims of investment fraud. She has “seen it all” when it comes to the schemes that investment brokers use to defraud their clients.   To learn more about whether you need an investment loss attorney for your current situation, then we invite you to contact us today on our online contact form, or by calling 888-768-2499. We are the investment fraud lawyers who are leveling the playing field for you.     There Are a Number of Reasons That Will Support Legal Action Against Your Financial Advisor Losing money due to market fluctuation is, simply put, the risk of investing. Losing money due to wrongful conduct on behalf of your financial advisor, however, may provide grounds to take legal action against him or her. Here are some common reasons why an investor will take legal action against a financial advisor or broker. 1. Outright Fraud. Selling fake securities or products; or not using your money to buy securities at all. 2. Broker Negligence. Investing your money in a way that is not […]

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