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Failure to Register With the SEC or FINRA

Most sellers of investment opportunities must be registered with the Securities and Exchange Commission (SEC) and also be members of the Financial Industry Regulatory Authority (FINRA). In some cases, brokers or investment advisers may make false claims as to their registration and membership status. This is an example of investment fraud that is taken very seriously by both the SEC and FINRA.

Avoid Unregistered Sellers

The SEC Office of Investor Education and Advocacy issued an Investor Alert warning individuals of this fraudulent scheme. Individuals, as well as the firms they work for, may misrepresent that they are registered with the SEC in order to give the appearance of greater legitimacy. Generally, brokers are required to register with the SEC and become members of FINRA. Similarly, most investment advisers must register with the SEC or the state securities regulator in the state of their principal place of business.

When investors are told by brokers or investment advisers that they are registered, those claims should be verified. A firm must have an active registration and any individuals involved must be currently licensed. Further, investors can check whether the firm and individuals have any history of complaints filed against them or whether they have been the subject of any disciplinary action.

In order to check firms and individuals, FINRA provides a tool called BrokerCheck to investigate whether any complaints have been filed. To search for whether registrations are active, licenses current, and any history of discipline, the SEC provides a tool called the Investment Adviser Public Disclosure (IAPD) database. In addition, it is also important to check with the state securities regulator to see if the individual and firm are registered. Information on state securities regulators can be found at the North American Securities Administrators Association (NASAA) website.

Under the federal securities laws, a company or private fund must register securities offered or sold, unless there is an exemption from registration. If an exemption is used, a notice, called Form D, must be filed. These notices are available to the public on the EDGAR database. Form D provides information about the issuer of the offering and the security being offered. This information includes the executive officers of the issuer, the size of the offering, and the date of first sale.

It is important to note that the SEC does not verify the information contained in the Form D. Further, the use of Form D cannot establish registration of individuals, firms, or their offerings. If an individual attempts to use Form D as an indication of approval by the SEC, investors should avoid dealing with that person. Further, investors are encouraged to report misrepresentations to the SEC through the SEC Whistleblower Program.

Help Protecting Investors

Fraudulent misrepresentations can lead to significant investment losses. In some cases, it is possible to hold those responsible for such fraudulent behavior accountable for the losses they cause. For more information, speak with an experienced securities law attorney today. At the Silver Law Group, we provide help for investors who have suffered losses due to the misconduct of brokers and investment advisers.

Client Reviews
“My in-laws lost their retirement funds to a dishonest broker. Silver Law Group and Scott Silver aggressively pursued their losses until he got their money back.” Ben M.
“I foolishly gave my money to a con artist promising me a great return on my money. Scott Silver zealously handled the matter, recovering my losses.” Darren S.
“I almost lost a lifetime of earnings after trusting the wrong person. Silver Law Group guided me through the arbitration process and a mediation, always fully prepared and committed to my case.” Scott T.