This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

This is Why Wall Street is So Last Century

By Hal M. Bundrick

NEW YORK ( MainStreet) -- Wall Street is passé. The real money is in that new app startup you just found out about -- or in a biotech breakthrough you really believe in. And with new crowdfunding investments set to explode, big upside deals will seem to be everywhere. Real estate, oil and gas, new media companies. These non-public investments are the kinds of opportunities more investors are seeking these days, particularly the young and wealthy, as they look beyond traditional public stock market offerings and choose to open the investment door marked "Private."

A recent survey conducted by iCrowd revealed that nearly half (49%) of high net worth investors under the age of 30 are currently invested in private placements. One-in-five wealthy investors between 45-60 years of age are, too.

But are they fully aware of the risks?

The Financial Industry Regulatory Authority (FINRA) has issued a new investor alert to remind consumers that private placements are risky and "can tie up their money for a long time."

While choosing to invest in a company not listed on a public stock exchange or registered with the Securities and Exchange Commission (SEC) may seem like an opportunity to make a profit the general public can't, there are barriers to entry. First, you need a fat wallet.

In most cases, but not all, you must be what is defined as an "accredited investor" to buy into a private placement.

"Investors should understand that many private placement securities are issued by companies that are not required to file financial reports, and investors may have problems finding out how the company is doing," says Gerri Walsh, FINRA's Senior Vice President for Investor Education. "Given the risks and liquidity issues, investors should carefully assess how private placements fit in with other investments they hold before investing."

The details on these deals are usually listed in a private placement memorandum or other offering documents - sometimes laced with inaccuracies and omissions, according to FINRA.

For investors looking into a private stock deal, FINRA says to consider the following:
  • Find out as much as you can about the company's business and understand how and when you are allowed to liquidate your private placement securities. Such "restricted" stocks are often hard, if not impossible, to sell.
  • Ask your broker what information he or she was able to gather about the issuing company and the private placement.
  • Be extremely wary if you receive paperwork to sign about a private placement without having a discussion with your broker first about if such an investment is right for you.
  • And use caution when considering private placements you hear about through spam emails or cold calling. They are very often fraudulent.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.19 -1.04%
FB $118.06 0.54%
GOOG $695.70 0.48%
TSLA $222.56 -4.20%
YHOO $36.00 -0.03%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs