|[September 17, 2013]
FINRA Issues New Investor Alert: Private Placements-Evaluate the Risks Before Placing Them in Your Portfolio
WASHINGTON --(Business Wire)--
The Financial Industry Regulatory Authority (FINRA) issued a new
investor alert called Private Placements-Evaluate the Risks Before
Placing Them in Your Portfolio to caution investors that investing
in private placements is risky and can tie up their money for a long
time. A private placement is an offering of a company's securities that
is not registered with the Securities and Exchange Commission (SEC (News - Alert)) and
is not offered to the public at large. Many private placements are
offered pursuant to Regulation
D of the Securities Act of 1933. In general, you must be an
"accredited investor" to invest in a private placement.
"Investors should understand that many private placement
securities are issued by companies that are not required to file
financial reports, and investors may have problems finding out how the
company is doing. Given the risks and liquidit issues, investors should
carefully assess how private placements fit in with other investments
they hold before investing," said Gerri Walsh, FINRA's Senior Vice
President for Investor Education.
FINRA is advising investors that if they are provided with a private
placement memorandum or other offering document, they should carefully
review it and make sure that statements by their broker are consistent
Private Placements contains a series of tips to help investors
determine if a private placement is right for them, including the
Find out as much as you can about the company's business and
understand how and when you might liquidate your private placement
Ask your broker what information he or she was able to review about
the issuing company and this private placement.
Be extremely wary if you receive paperwork to sign about a private
placement without having a personalized discussion with your broker
about why such an investment is right for you.
Be extremely wary of private placements you hear about through spam
emails or cold calling. They are very often fraudulent.
FINRA is the largest non-governmental regulator for all securities firms
doing business in the United States. FINRA is dedicated to investor
protection and market integrity through effective and efficient
regulation and complementary compliance and technology-based services.
FINRA touches virtually every aspect of the securities business - from
registering and educating all industry participants to examining
securities firms, writing and enforcing rules and the federal securities
laws, informing and educating the investing public, providing trade
reporting and other industry utilities, and administering the largest
dispute resolution forum for investors and registered firms. For more
information, please visit our website at www.finra.org.
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