The Securities and Exchange Commission (SEC) requires almost all securities to be registered with the SEC. This helps the agency reduce the opportunity and ability for a broker or the company seeking an investment to commit fraud. Not all securities require registration with the SEC, however – these are known as Regulation D securities.
Regulation D securities are named for the rules promulgated by the SEC allowing smaller companies to raise capital through the sale of equity or debt securities without registration; however, these securities can only be sold to certain accredited investors.
How Do I Qualify as an Investor?
An investor is accredited if one or more categories below apply:
- A person with assets worth more than $1 million or an income of $200,000 annually
- A bank, insurance company or small business investment company
- A trust with assets of more than $5 million and not formed by the securities being offered
- A charitable organization with assets exceeding $5 million
(Note: the SEC currently is reviewing changes to the accredited investor qualifications.)
Sadly, brokers often improperly sell Regulation D securities to unaccredited investors and even with accredited investors, brokers often improperly sell the securities – often times via online or mail solicitation. Some of these securities turn out to be fraudulent investments and Ponzi schemes, costing you your entire investment.
Call a Los Angeles Securities Fraud Attorney Today
If you have questions about how Regulation D/private placement investments work, or if you have suffered investment losses as a result of a Regulation D security, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities fraud attorney for a consultation today.