The Financial Industry Regulatory Authority warned investors Tuesday that investing in private placements is “risky and can tie up their money for a long time.”
The alert comes two months after the Securities and Exchange Commission lifted a ban on advertising such offerings, as required by the JOBS Act.
In an investor alert called Private Placements—Evaluate the Risks before Placing Them in Your Portfolio, FINRA explains that a private placement is an offering of a company’s securities that is not registered with the SEC and is not offered to the public at large.
Many private placements are offered pursuant to Regulation D of the Securities Act of 1933, and, in general, you must be an accredited investor to invest in a private placement. The rules on how private placements can be advertised were recently loosened under the JOBS Act.