Private Placements

A private placement is a non-public offering used to raise capital (rather than an initial public offering). An offering that is not a public offering is exempted under Regulation D of the Securities Act from SEC registration.

These investments are often sold to “accredited investors” by various broker-dealers and financial advisers. Private placement investments are generally illiquid, meaning they cannot be readily sold and are not traded on the open market. Private placements are typically promissory notes or shares of common stock or preferred stock.

Private placements have come under intense scrutiny following highly publicized cases of misconduct in the issuance of these securities. Broker-dealers who sold these private placements typically earn large commissions along the way. These broker-dealers and their representatives commonly place their own interests ahead of their clients.

The private placements are often sold to clients as low-risk, safe investments suitable for retirees and as part of the fixed-income component of a client’s portfolio. In reality, these investments were not low-risk as represented; in reality, these private placements are often among the highest risk investments an investor can purchase.

Broker-dealers often also failed to perform even the most basic due diligence into the companies whose securities they were selling.

If you have purchased, or are considering the purchase of, private placement securities, please contact Wittenberg Law to discuss your legal rights and options.