Private placement securities are investment offers that are not placed on public forums. By the name itself, selected and accredited investors get invites to privately invest in securities released by the company.
These securities are released under the sole discretion of the company. They are not the mandatory offers regulated by the government. This investment promises a high yield and an easy process, but is it worth the risk?
The Pro: Seamless Documentation
The Con: Minimal Government Regulation
Placing your investment, and obtaining the certificate and memorandum on the security is easier in a private placement. This is because the government does not regulate this. The company can decide to release the securities for sale.
However, that is also the downside. There is little government regulation in this process. Hence, it is important that you protect yourself with the help of an experienced private placement law firm. According to Capital Fund Law Group, private placement law firms offer assistance in dealing with changing securities laws. This way, you cover the legal intricacies and you will only have to worry about the money you will invest.
The Pro: Ease of Access and Promise of High Returns
The Con: Vulnerability to Fraudulent Declarations
There have been cases wherein some brokers or even some financing companies have declared fraudulent values to raise the value of their portfolio and securities for sale. This is a huge risk for the buyer.
Ask for a private placement memorandum or a detailed offering document, whichever is available. Review the document carefully and consult a private placement law firm to fully analyze the offering. This way, you determine if it is a good investment or if it will cause financial loss.
Determine if the private placement fits well with your portfolio. Assess the risks. Study the businesses carefully and once you are sure, invest and reap the benefits.