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.

According to securities arbitration lawyers, private placements allow smaller companies to use the sale of debt securities or equities to raise capital without it becoming necessary for them to register these securities with the Securities and Exchange Commission. Because these investments are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors.

Stock fraud lawyers say that because the creation and sale of private placements often carry high commissions, these investments continue to be pushed by brokerage firms despite the fact that they may be unsuitable for investors. FINRA rules have established that brokers and firms 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.

Current investigations regarding this investment are related to whether FINRA-registered brokerage firms can be held liable for improperly selling the Woodlark Capital private placements and other high-risk private placements to their clients. Any investors who were recommended and sold the Woodlark Capital private placements that could not be considered sophisticated, high-net-worth investors may be able to recover losses through FINRA arbitration.

If you suffered significant losses as a result of your investment with Woodlark Capital, or another private placement, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.