
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. 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 failure at Medical Capital, Provident Asset Management, and Striker Petroleum. Other private placement investments include IMH Secured Loan Fund and DBSI. Broker-dealers who sold these private placements include Securities America, Capital Financial Services, National Securities, CapWest, and Independent Financial Group, among others.
These broker-dealers sold millions in toxic private placements earning large commissions along the way. These broker-dealers and their representatives placed their own interests ahead of their clients. The private placements were 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 fact, these were one of the highest risk investments possible.
Broker-dealers often also failed to perform even the most basic due diligence into the companies whose securities they were selling.
Our office is continuing to pursue claims in FINRA arbitration on behalf of defrauded investors who are victims of misconduct related to private placement investments. To determine if your investment losses in private placement securities like Medical Capital and Provident Royalties/Shale Royalties are recoverable through arbitration claims and lawsuits, please contact our office for a free consultation.