SEC Issues Investor Alert Urging Caution For “Broadly Advertised” Investments

The SEC’s Division of Enforcement’s Retail Strategy Task Force and Office of Investor Education and Advocacy (OIEA) have released an investor alert encouraging investors to be careful when investing in offerings that are “broadly advertised”.

Did you invest with an unregistered stockbroker? Investments take many forms; many securities are investments other than stocks listed on a national exchange. Over the last decade, some of the largest Ponzi schemes in America were assisted by unregistered financial advisors selling unregistered securities.

While investments which are not directly tied to the stock market may seem attractive at first, many of these investments are still high risk and are being sold under false pretenses. Ponzi schemes targeting unsophisticated investors seeking conservative investments still dominate our headlines and are frequently perpetrated by those who seek to hide behind exemptions from registration or compliance with the federal securities laws.

What Is A Broadly Advertised Investment?

The federal securities laws refer to investments that are advertised to the public as “broadly advertised” or “generally solicited”. The advertisements may be on the radio, television, social media, or in a newspaper. Broadly advertised investments sometimes invite investors to a seminar or free meal at a hotel to sell them on the investment.

The SEC’s alert reminds investors that “Just because an offer to invest is advertised openly doesn’t mean it complies with federal securities laws.” Investors are encouraged to remain vigilant and not presume that an offering complies with the law because it is broadly promoted.

Case In Point: A Better Financial Plan/Dean Vagnozzi

As an example of a broadly advertised investment that violated federal securities laws, the alert details the SEC’s charges against Philadelphia-based A Better Financial Plan and its owner Dean Vagnozzi, which sold over $32 million in unregistered securities offerings.

Federal securities laws require that issuers offering securities file a registration statement with the SEC that provides details about the issuer and the investment. Issuers may be exempt from registration if they have a recognized reason for not providing the information.

A Better Financial Plan (ABFP) promoted investments in private funds and life settlements to hundreds of investors, many of whom were retired and invested hundreds of thousands or millions of dollars of their retirement savings. The securities offerings violated federal securities laws because they were required to be registered and were not.

ABFP and Vagnozzi used general solicitation such as direct mailers, websites, and radio advertisements with invitations to free steak dinners, even though the offerings were unregistered and didn’t qualify for exemption registration. They also acted as an unregistered broker in connection with an offering.

Silver Law Group represents Par Funding investors, which Dean Vagnozzi and A Better Financial Plan sold to investors.

Evaluating Broadly Advertised Investments

The SEC’s investor alert advises the public to check the background of the person trying to sell you an investment and to determine if the offering is registered or exempt from registration. Most people selling securities need to be registered with the SEC. Go to Investor.gov and put the person’s name into the Check Out Your Investment Professional field to find out if they are registered.

Investors can see whether an offering is SEC registered at EDGAR, a government website with information on registered offerings. If a salesperson claims an offering is registered and there’s no registration statement on EDGAR, the SEC recommends not investing.

The investor alert advises investors to be on the lookout for common red flags that are signs of fraud:

Claims of low risk and high returns. Most investments involve some risk. And higher returns typically mean more risk. Claims that an investment will deliver high returns with low risk (or no risk) are often signs of fraud. Par Funding investors were promised interest rates as high as 14% and no risk.

Unregistered investment professionals. Many securities frauds that target retail investors involve securities sold by unregistered people.

Aggressive tactics. Scammers often try to create a sense of urgency so investors have a feeling that they don’t want to miss out on an opportunity.

Inadequate requirements. Many offerings require that investors have accredited investor status due to the risk involved. Unregistered investments with no income requirements or investment limits may not be in compliance with federal securities laws.

Did You Lose Money With A Broadly Advertised Investment?

If you have investment losses with a broadly advertised investment, including with Dean J. Vagnozzi, A Better Financial Plan, or Par Funding, we may be able to help you recover your losses. Silver Law Group’s nationally-recognized securities and investment fraud attorneys help investors throughout the country. Contact Silver Law Group at (800)-975-4799 or e-mail ssilver@silverlaw.com for a consultation today.