Investors Could Recover Losses for Unsuitable Recommendation of Private Placements

by InvestorLawyers on October 22, 2013

in Arbitration,FINRA,Private Placements,SEC,Securities Fraud,Suitability

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses because of their broker or advisor’s unsuitable recommendation of private placements. In September, a new investor alert was issued by the Financial Industry Regulatory Authority (FINRA) titled “Private Placements — Evaluate the Risks Before Placing Them in Your Portfolio.” Unfortunately, many individuals have already suffered significant losses because they trusted the unsuitable recommendation of their investment adviser.

A private placement, as defined by FINRA, is “an offering of a company’s securities that is not registered with the Securities and Exchange Commission (SEC) and is not offered to the public at large.” According to stock fraud lawyers, private placements are generally only suitable for accredited investors. Accredited investors have a net worth exceeding $1,000,000 and an income of at least $200,000 (individually) or $300,000 (jointly with spouse).

“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,” FINRA officials note. “Given the risks and liquidity issues, investors should carefully assess how private placements fit in with other investments they hold before investing.”

However, according to securities fraud attorneys, firms and their registered representatives have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Private placements are typically not suitable for individuals with conservative portfolios, low risk tolerances or who need easy access to funds.  An investment or recommendation clearly may be unsuitable even if the customer is an accredited investor.

If you suffered significant losses in private placements because of the unsuitable recommendation of your broker or adviser, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

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