SEC Issues Investor Alert Regarding Unregistered Offerings

The SEC Office of Investor Education and Advocacy issued an Investor Alert to help investors identify potentially fraudulent unregistered offerings.

The Investor Alert reminded investors that a company may not offer or sell securities unless the offering has been registered with the SEC or an exemption to registration is available. An unregistered offering, also known as a private placement, is not subject to some of the laws and regulations that are designed to protect investors, such as disclosure requirements that apply to registered offerings. The SEC advised that, because of the flexible nature surrounding their regulation, unregistered offerings are often used to conduct investment scams.

The alert outlines 10 red flags to identify potential fraud from an unregistered offering:

1. claims of high returns with little or no risk;
2. unregistered investment professionals;
3. aggressive sales tactics;
4. problems with sales documents;
5. no net worth or income requirements;
6. no one else seems to be involved;
7. sham or virtual offices;
8. not listed as being in good standing;
9. unsolicited investment offers; and
10. suspicious or unverifiable biographies of managers or promoters.

See: SEC Investment Alert.