Below is a recent article published by Securities Attorney Jake Zamansky on Forbes.com - 09/14/12
The Securities and Exchange Commission late last month released a ?Study Regarding Financial Literacy Among Investors.? The Study is 182 pages long and based on focus groups and surveys of over 5,000 investors. It concludes that it is shocking how little most people know about investments.
What?s more shocking is that, the very day before it released its study, the SEC proposed a rule that would allow issuers of high-risk private investments to promote their offerings to the general public for the first time. Right now, only the wealthy, typically identified as people with $1 million or more to invest, can buy into such risky deals.
Rather than seeking to protect the unwitting investors from the sharks in the water, the SEC has doubled down and given a green light to any huckster who wants to peddle ?private offerings.? Such offerings include hedge funds, affinity Ponzi schemes, private placements and REITs.
Noted columnist Jason Zweig of the?Wall Street Journal outlined the lunacy of the SEC?s proposal. ?The new regulations will ease capital-raising for many legitimate companies,? Zweig wrote. ?But they also could subject unwary and vulnerable investors to deals that offer limited financial disclosures and even less liquidity.?
Some industry lawyers are extremely skeptical of opening the access to such deals, according to Zweig. ?Because the promoters are being supplied with much larger nets to try to catch their investors, there?s going to be much more possibility of fraud and abuse,? says Robert Robbins, a partner at the law firm of Pillsbury Winthrop Shaw Pittman in Washington. ?You could see ads on the Shopping Channel or the checkout screen at your neighborhood nail salon.?
Zweig is extremely pessimistic about the outcome for investors. ?Once the rule goes into effect, probably in a few months, every Tom, Dick and Harry can be pitched on stakes in hedge funds and other exclusive investment pools, as well as oil-and-gas partnerships, real-estate securities and a host of other offerings that long have been sold privately under an exemption to the federal securities laws known as Regulation D,? he says. ?So-called Reg D securities aren?t listed on an exchange and rarely trade, and their issuers don?t have to file financial statements publicly with the SEC.?
Unfortunately, having lived through many tragedies with clients who were wiped out by such investments, I know how this story ends?badly.
Disclosure: Zamansky & Associates are securities attorneys representing investors in federal and state litigation and arbitration against financial institutions, including proceedings concerning hedge funds, Ponzi schemes, private placements and REITs.
Read article by Securities Attorney Jake Zamansky on Forbes.com
Source: http://www.zamansky.com/blog/2012/09/investing-for-dummies.html
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