Selling private placements can be very lucrative, paying financial advisors commissions as high as 12%. This creates a classic conflict of interest. While a financial advisor should only recommend investments that are suitable for investors based on the investors’ risk tolerance, net worth, and investment objectives, the huge amounts of money to be made in selling private placements sometimes leads to sales of private placements that are not suitable for investors.
To help investors gauge this conflict of interest, the Financial Industry Regulatory Authority (FINRA) requires that financial advisors disclose to investors just how much money they will collect for successful sales of private placements. NSC violated this rule. Instead, NSC disclosed that it would receive some compensation (as all brokerage firms do in all trades they execute), but failed to quantify the high commissions it would receive for selling private placements. In some cases, according to FINRA, investors did not get this information, so they did not have as much information as the law required they receive in order to make an informed decision to purchase private placements from NSC. As a result, FINRA fined NSC $20,000.
If you believe you did not have all of the information you deserved when purchasing a private placement, contact the investment fraud attorneys at Investor Defense Law LLP to see if they can help you recover your losses.
Investor Defense Law LLP is a law firm dedicated to helping investors in California, Georgia, and Washington recover losses caused by stockbrokers, financial advisors, or investment firms. To learn more, contact an investment fraud attorney at 800.487.4660.