Investors warned of risks

SANTA FE — In advance of a federal rule to allow advertising of high-risk and potentially fraudulent private placement offerings, Regulation and Licensing Superintendent J. Dee Dennis Jr. warned investors about their risks.

Private placement offerings allow companies to raise money by selling stocks, bonds and other instruments. These offerings may be exempt from federal securities registration requirements. As a result, this exemption allows a company to raise business capital without having to comply with the registration requirements of a public securities offering.

Currently, Rule 506 of Regulation D of the Securities Act of 1933 does not permit general solicitation or advertising of private placement offerings. The Federal JOBS Act directed the United States Securities and Exchange Commission to lift this ban as long as the sales are limited to “accredited” investors – people who have sufficient wealth or access to information that would presumably allow them to make completely informed investment decisions. The USSEC is finalizing its proposed rule lifting the ban.

Once implemented, this rule will allow companies and promoters to offer securities through direct mail, cold calls, free lunch seminars and television or radio commercials.

“Unsuspecting investors can be lured into these schemes,” Dennis said. “These offerings require sound research and … if these offerings sound too good to be true, then there’s high probability that they are.”

To learn more, visit www.RedFlagsNM.com.