A private placement is a privately sold security that is sold directly to the investor instead of as a public offering. Private placements are very high-risk investments as they are unregistered and there is no way to determine the accuracy of your agreement. While it not uncommon for investors to permanently lose money on these investments, the Securities Lawyers have been able to help our clients recover losses.
So when you talk about private placements and why investors should be wary, it's that there is no regulation. You know, there are times in which the regulations that we have fail us, and we end up with claims even on regulated products or regulated individuals. But at least in those situations, there's some kind of oversight, there's some kind of attempt for supervision. When it comes to private placements, these are really just investments that are not regulated by anybody. It's a private investment in a security, which is typically defined as a promise of profits based on the expectation of the efforts of others. Right? You're going to give somebody money and they're going to do something with it, and they're going to give you profits back. And so they'll sell that as a private placement. You'll see things like subscription agreements or a PPM will be the nomenclature that you'll see.
But really, they're getting your money in exchange for a promise to give you some return back. And the real danger with those, especially being sold by unlicensed individuals or unregistered private placements, are that nobody has looked at it to see if even the statements they make within the investment documents are true. You know, never mind whether they're going to be able to pay you the return. Does the underlying assets, the thing they say they're going to buy even exist? You know, all those types of things. It's real danger. And unfortunately, it's the kind of scheme we see all the time when our clients come in. And it's especially difficult to recover anything for clients in those situations because, a lot of the time, those people disappear and you never find them again to be able to go and make a claim.