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Things to consider when investing in exempt securities

If you are considering investing in a private placement, or perhaps other exempt securities offerings, you ought to educate yourself on the private capital markets generally, including potentially seeking advice from a professional financial advisor.

We do not provide financial advice but can identify a few objective facts to consider in advance of potentially making an investment in a private company.

  • Securities investments, particularly through private placements or other exempt offerings (like Rule 506(c) offerings), involve risk. You should try and appreciate your risk appetite before investing.
  • Securities sold in private or other exempt offerings are generally not as easily resold as the securities of a publicly-traded company.
  • Companies selling securities in the private markets will likely only be required to provide you with minimal disclosure or substantive disclosure that is otherwise less than what it typically provided by publicly-traded companies.
  • Similarly, you may only receive minimal, if any, ongoing disclosure after the time of your initial investment.

Remember – you are under no compulsion to invest in the securities of a given company. Ask questions and read the disclosures provided. Pay careful attention to any risk factors included. Consult with your financial advisor if you have one and, in any event, do your diligence.

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Check out the SEC’s website and other investor resources, like the EDGAR database. Don’t hesitate to reach out to your local state securities regulator, if you are in North America. The North American Securities Administrators Association (the other “NASAA”) is also a great resource for investors.

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