Insights from the experts in investment fiduciary responsibility.

Fiduciary Links: As Reg D Advertising Begins, FINRA Cautions Investors

Posted by Bennett Aikin on September 23, 2013

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>>>On the same week that private placement advertising restrictions were lifted and public marketing began, FINRA took the opportunity to alert investors to the risks inherent to Regulation D investments. The alert explained how the investments differ from traditional investments and warned investors that the special risks involved must be evaluated carefully before installing the investments into a portfolio. Among the regulator's recommendations for evaluating private placements are:

  • Learn about the company's business, the ease of access to investment information, and liquidity concerns.
  • Expect your broker to be knowledgeable about the investment.
  • Make sure the investment fits in with the mix of other investments you hold. 
  • Carefully review documentation and make sure it reconciles with what has been relayed verbally. 
  • For real estate private placements, ask about the schedule and source of investor distributions.
  • For oil and gas private placements, ask what you can expect to receive in return for your investment, and the circumstances that would result in a loss of some or all of your investment. 
  • Ask whether the private placement is being sold on a conditional or contingency basis. 
  • Be extremely wary of private placements you hear about through spam emails or cold calling. 
  • Ask and check. Ask if the investment professional selling the private placement is registered with FINRA or the SEC. Then check to see if this is in fact the case.

>>>We'd also like to take this opportunity to recognize Michael J. Swallow of CBIZ Financial Services, who was named Volunteer of the Year by the Invest in Others Charitable Foundation at their Community Leadership Awards ceremony on Thursday. Michael was honored for helping to create the Northeast Ohio Foundation for Patriotism, which helps support local military personnel and their families. Michael is an AIF Designee. He and all other other honorees and finalists are to be commended. 

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