SEC Warns Investors About Pre-IPO Investment Scams
From the desk of Jim Eccleston at Eccleston Law
The SEC's Office of Investor Education and Advocacy (OIEA) has issued an Investor Alert warning investors about scams that falsely offer opportunities to purchase "pre-IPO" shares of companies. The SEC continues to receive complaints and bring enforcement actions involving those schemes, which scammers may promote through social media, websites, phone calls, emails, in-person solicitations, or other methods.
"Pre-IPO" investing involves purchasing an interest in a company before it conducts its initial public offering, also known as "going public." Investor.gov reports that stock promoters may attract investors by promising the potential for high returns from investing in a start-up at an early stage.
The SEC cautions that those investments carry significant risks, including the potential loss of an investor's entire investment. A start-up may fail, its stock may not increase in value, or the company may never go public. Even if the company remains viable, a market for its shares may never develop, leaving investors unable to resell their shares.
Pre-IPO offerings do not register with the SEC. Federal securities laws prohibit unregistered securities offerings unless an exemption from registration applies. Many registration exemptions also prohibit companies from broadly offering securities to the general public.
As a result, the SEC warns that many pre-IPO offerings marketed to the general public may violate federal securities laws.
The SEC encourages investors to thoroughly research both the investment product and the professional offering it before making an investment decision.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, sec investor alert, pre-ipo scams, investment fraud, securities regulation, investor protection
