What Are Private Placements?
The financial markets and securities industries are complex. There are countless investment opportunities out there. And even seasoned investors rely on the advice of their financial advisors when deciding whether a particular investment is right for them.
But stockbrokers and financial planners don’t always prioritize their clients’ financial interests. Instead, they do what they have to do to generate commissions. Even when defrauding you in the process.
Private placements can be lucrative for investors. But they aren’t suitable for everyone. If your broker suggested you invest in private placements and you lost money, with the help of an investment loss lawyer you may be able to recover these losses in arbitration.
Below, we go into further detail about what private placements are and why they can be a risky investment.
Understanding Private Placements
Private placements are unique. These stocks or bonds are only offered to a select group of investors and brokerage institutions as opposed to the open market. Some of the different types of investors who might participate in private placements include:
- Mutual funds
- Wealthy individual investors
- Pension funds
- Insurance companies
- Other financial institutions
Private placements are often used as a way for startups and other companies to raise capital instead of utilizing an initial public offering (IPO).
Risks of Private Placements
Although private placements can prove to be a great option for many investors, they are also risky. Private placements do not need to be registered with the U.S. Securities and Exchange Commission (SEC). This means the private placements are minimally regulated, if at all.
Private placements also rarely disclose financial information, nor are they required to provide a prospectus to investors. This lack of financial information may enable investors to demand a higher interest rate, but it also means the investor is at a higher risk of not being repaid.
Contact an Investment Loss Attorney
Did you invest in private placements on your broker’s recommendation? Did you suffer losses due to this investment? Get help from an experienced investment loss lawyer at Wolper Law Firm to discuss your options for financial recovery.
Call our office at 800.931.8452 or complete the quick contact form provided at the bottom of this page to schedule your free, no-risk consultation.