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What Do Individual Investors Need to Know about Unregistered Securities Offerings?

October 7, 2020 Blog

Recently, there seems to have been an uptick in U.S. Securities and Exchange Commission (SEC) enforcement actions involving unregistered securities offerings. In October, the SEC publicized two such cases in press releases issued through its website. In one of these cases, the SEC charged an Israeli company with, “offering and selling security-based swaps to over 5,000 retail investors without registration.” In the other, the agency announced a final judgment against a company accused of conducting an unregistered offering of digital tokens in violation of federal law.

As investment fraud attorneys, this gives us cause for concern. Investors who unknowingly invest in unregistered offerings can lose their entire investments; and, in many cases, recovering their losses can prove challenging.

3 Important Facts about Unregistered Securities Offerings for Individual Investors

Under federal law, all securities offerings made to U.S. investors are subject to registration unless a specific registration exemption applies. Generally speaking, these exemptions apply to specific types of offerings under specific circumstances—they do not allow for the large-scale public promotion of unregistered offerings to “mom and pop” investors. The reason for this is simple: The SEC’s securities registration system provides a means of oversight; and, when companies and individuals sidestep this oversight, it puts individual investors at risk for substantial losses.

If you believe that you may have invested in an unregistered securities offering, what do you need to know? Here are three important facts about unregistered securities offerings for individual investors:

1. Making an Unregistered Offering is a Form of Securities Fraud

First, making unregistered offerings is a form of securities fraud. It is illegal for companies to make unregistered securities offerings, and it is illegal for brokers to promote unregistered offerings to investors. This means that if you experienced losses after investing in an unregistered security, you may be entitled to recover your losses.

2. SEC Enforcement Actions Do Not Necessarily Lead to Recoveries for Aggrieved Investors

Second, while the SEC pursues enforcement actions against companies and brokers that promote unregistered securities offerings, these enforcement actions do not necessarily lead to financial recoveries for aggrieved investors. In some cases, investors may recoup a portion of their losses; in others, they might not receive any restitution at all. While the SEC seeks to secure funds for investors when possible, it focuses primarily on holding companies and individuals accountable and making sure that they do not violate federal securities laws again.

3. Aggrieved Investors Can Independently Pursue Claims for Financial Recovery

Third, regardless of whether the SEC pursues an enforcement action, as an aggrieved investor, you can take legal action to recover your fraudulent investment losses. An investment fraud attorney can help you file a federal lawsuit or pursue FINRA arbitration against the company or broker that is responsible for the losses you have endured.

Speak with an Investment Fraud Attorney at Zamansky, LLC

Have you lost money in an unregistered securities offering? If so, our attorneys may be able to help you recover your fraudulent investment losses. To discuss your case in a free and confidential consultation, call 212-742-1414 or request a free consultation online today.