July 11, 2018 Comments (0) Blog, Current Investigations

State of MA Investigates Broker-Dealers for Private Placement Sales

private placement
(Last Updated On: July 11, 2018)

 Private Placement Investments Investigation

According to reports, the State of Massachusetts has launched an investigation into sales practices in connection with private placement investments.

The Massachusetts securities regulator’s investigation was reportedly launched after a recent Wall Street Journal in-depth report announced that brokerage firms with high numbers of disclosure events are selling billions of dollars in private placement investments, often targeting seniors.

According to William Galvin, Secretary of the Commonwealth, the sweep includes 10 broker-dealers based in MA which sell private placements and have 15 percent or more of agents with current disciplinary incidents.

Inquiry letters have reportedly been sent to the following: Arthur W. Wood Company, Santander Securities, LPL Financial, U.S. Boston Capital Corporation, Bolton Global Capital, Advisory Group Equity Services, Moors & Cabot, Detwiler Fenton & Co., BTS Securities Corporation, and Winslow, Evans & Crocker.

Massachusetts regulators surveyed more than 200 firms regarding their hiring and disciplinary practices two years ago, finding that over a two-and-a-half-year period, more than 18 percent of the reps that were hired by the surveyed firms had current disclosure incidents. Additionally, the regulators found that more than 90 percent of broker-dealer agents with disclosed disciplinary incidents were not subject to enhanced supervision.

High Risk Private Placements under Regulation D

Private placements are typically restricted to sophisticated investors, such as hedge funds and insurers, seeking alternatives to stocks and bonds and mutual funds.

These investments are not subject to some of the laws and regulations that are designed to protect investors, such as the comprehensive disclosure requirements that apply to registered offerings.  Private and public companies engage in private placements to raise funds from investors.

These investments are typically illiquid, and are considered high risk investments. Meaning when the investor is ready to sell, there may not be an available buyer. If they do find a buyer it may be at a disappointing loss.

Additionally, brokers can earn high fees and commissions for selling private placement investments which can give them strong motivations to sell, sometimes without consideration for their client’s best interest.

 Despite the risks of investing in private placements, brokerage firms continue to push this type of investment because of the high commissions associated with their sale and creation.

Free Consultation with a Securities Attorney

If you have concerns regarding your private placement investment and would like to speak with a securities attorney about your options, please call The White Law Group at 888-637-5510.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group and its representation of investors in FINRA arbitration claims, visithttp://www.whitesecuritieslaw.com.

 

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