A:

Each year, millions of Americans lose money to con artists who convince them to invest in companies through "private offerings" that have "limited or no risk" and the promise of "high returns". In most cases, it is a felony for anyone to solicit funds for capital investment in a company that has not been registered with the Securities and Exchange Commission (SEC). Because most opportunities that seem "too good to be true" usually are, beware of unsolicited investment offers - especially those that come by phone or via the internet.

An investor should never purchase a security that is not registered with the SEC before seeking legal and financial direction from a trusted advisor. Contact your state securities regulator to determine if an investment instrument and the advisor selling it are registered. You can also use the SEC EDGAR database to determine if a company is registered with the SEC.

For more information on this topic, read Policing The Securities Market: An Overview Of The SEC.

This question was answered by Katie Adams.

RELATED FAQS
  1. What is the Writ of Mandamus?

    A writ of mandamus is a court order issued by a judge at a petitioner’s request compelling someone to execute a duty he is ... Read Full Answer >>
  2. Are UTMA accounts escheatable?

    Like most financial assets held by institutions such as banks and investment firms, UTMA accounts can be escheated by state ... Read Full Answer >>
  3. What is the SEC's escheatment process?

    The U.S. Securities and Exchange Commission (SEC) does not have its own escheatment process. Rather, the SEC notes that the ... Read Full Answer >>
  4. Can the IRS audit you after a refund?

    The U.S. Internal Revenue Service (IRS) can audit tax returns even after it has issued a tax refund to a taxpayer. According ... Read Full Answer >>
  5. How does escheatment impact a company?

    In recent years, state governments have become increasingly aggressive in enforcing escheatment laws. As a result, many businesses ... Read Full Answer >>
  6. What happens if property is wrongfully escheated?

    If your financial accounts, such as bank, investment or savings accounts, are declared dormant and the managing financial ... Read Full Answer >>
Related Articles
  1. Personal Finance

    How the Green Card Lottery Really Works

    Here's how the popular green card lottery, run by the U.S. State Department, operates, including some tips on improving your odds of winning.
  2. Investing News

    Obama Wants to Double Wall Street Regulation

    President Obama wants to double the budgets of the SEC and the CFTC over the next five years.
  3. Taxes

    Why People Renounce Their U.S Citizenship

    This year, the highest number of Americans ever took the irrevocable step of giving up their citizenship. Here's why.
  4. Personal Finance

    What it Takes to Get a Green Card

    Grounds for getting a green card include having family members in the U.S., being a certain type of refugee or specialized worker, or winning a lottery.
  5. Investing News

    ABC's Madoff Miniseries Explores His Charm, Smarm

    An ABC miniseries on Ponzi scheme king Bernie Madoff gets inside the head of a man who was, in fact, not too big to fail.
  6. Career Education & Resources

    Laws & Regulations To Know Before Changing the Name of Your Business

    Discover some of the most important steps you need to take after making a decision to change your legally established business name.
  7. Personal Finance

    Passport Procrastinators: This Year, Renew Early!

    Millions of passports issued nearly 10 years ago when the Western Hemisphere Travel Initiative became law are expiring. Expect backlogs; leave extra time.
  8. Financial Advisor Technology

    Advisors: What to Know Before You Text

    Texting is becoming more popular between clients and financial professionals, but compliance can be tricky. Here's what to know before advisors text.
  9. Term

    Understanding Rule 144A

    Rule 144A is an SEC rule that changes the two-year holding period requirement on privately placed securities.
  10. Retirement

    Power of Attorney: When It's Critical to Get One

    "The sooner the better" is the usual answer.
RELATED TERMS
  1. Novation

    1.The act of replacing one participating member of a contract ...
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  3. Emergency Banking Act Of 1933

    A bill passed during the administration of former U.S. President ...
  4. Slander

    Slander is the act of harming one person’s reputation by telling ...
  5. Libel

    Libel is publishing a statement about someone in written form ...
  6. Defamation

    Defamation is any statement (written or spoken) that damages ...
Hot Definitions
  1. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  4. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  5. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
Trading Center