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How to Avoid Common Investor Problems

The Financial Industry Regulatory Authority (FINRA) has published a best practices guide for investors that describes common investor problems and how they can be avoided. These are the most common complaints FINRA’s Investor Complaint Center receives, and recommendations for avoiding them.

1. Misrepresentation. Misrepresentation is an untrue statement or omission of material fact that a broker makes purposefully relating to an investment. This may happen with any security, but is more common with low-priced, speculative securities because they are riskier.

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An investor alert has been issued by the Financial Industry Regulatory Authority. The alert warns investors that private placements are risky and can tie up funds for a significant period of time.

A private placement is an offering of securities by a company that is not offered to the public at large and is not registered with the SEC. Many of these offerings are made pursuant to Regulation D of the Securities Act of 1933. Generally, one must be an “accredited investor” to make an investment in a private placement. Institutions such as banks and insurance companies, and organizations or trusts with assets of $5 million or more, are accredited investors.

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