Private Placements Under Regulation D

Skilled Securities Attorney for Los Angeles and Elsewhere

When it comes to investing through a broker, trust is perhaps the most important component of the relationship. Many investors lack the knowledge and experience that brokers have. Some brokers choose to take advantage of this disparity to mislead investors for their own financial gain. There are numerous mechanisms that investors can use to invest their money, including a private placement under Regulation D. This is a complicated and very risky security vehicle, which requires a broker to help his clients make informed and appropriate choices. Los Angeles securities law attorney Steve Buchwalter is experienced in handling broker negligence cases involving private placements and are ready to assist you.

Negligence and Fraud Involving Private Placements Under Regulation D

A private placement is an investment offering that is only available to a small group of investors and not available to the general public. They pay the broker very high commissions, are not sold on the exchanges, and can be difficult, or impossible to sell. They are also known as 506 offerings or Reg. D offerings. A private placement can include preferred stock, common stock, and other methods of interests including warrants, hedge fund interests, promissory notes, debentures, and bonds. They are commonly used in the venture capital world and implemented through various rounds. These types of investment are inappropriate for most investors.

Although these offerings must comply with various disclosure requirements, the offered securities do not have to be registered with the Securities and Exchange Commission if the offering meets one of the exemptions. As a result, private placements are typically offered through a Private Placement Memorandum (PPM) instead of a prospectus. The PPM must include all material facts regarding the investment. Any misrepresentations about the material facts or misleading information may prompt an investor to invest in the security to his or her financial detriment.

There are many different ways that a private placement can involve negligence or fraud on behalf of a broker. In addition to fraud in the PPM, a broker can mislead an investor about the prudence of investing in this security. Because brokers have a sophisticated level of knowledge, the law views them as fiduciaries and requires them to exercise the highest duty of care in advising clients. If a broker fails to use this level of care, or intentionally misleads an investor for his or her own financial gain, the investor can sue the broker for negligence and/or fraud. If the broker works for a brokerage firm, the investor would also have a claim against the firm based on a doctrine called vicarious liability. Under this doctrine, an employer is liable for the tortious acts of his or her employees committed during the course and scope of employment. If the plaintiff is successful in proving his or her claim, he or she is entitled to the difference between the actual value of his or her accounts and the estimated value of his or her accounts had the broker adhered to the duty of care.

Consult a Dedicated Los Angeles Securities Lawyer for your Claim

Finding out that your broker may have misled you or used your relationship for his or her own benefit can be extremely devastating, especially if it involves substantial financial loses. Los Angeles securities fraud attorney Steve A. Buchwalter has several decades experience in securities law and understands exactly what it takes to hold a negligent or reckless broker responsible. We proudly represent clients throughout California, including Orange County, Beverly Hills, Los Angeles County, Pasadena, Newport Beach, and Santa Barbara. Call us now at (818) 501-8987 or contact us online to set up your free consultation now.