Private and Outside Investments

These claims involve the broker recommending investments in securities that are private in nature. They are considered “private” because they do not trade on any “public” exchanges. Examples can include private placements, limited partnerships or an investment in a hedge fund. These types of investments often require the investor to meet certain criteria relating to net worth, income and investment sophistication. Brokers may misrepresent those criteria in order to sell the high-commission product to their customers, even though the investment is not suitable for them.

 

Outside investments are those which are not approved by the brokerage firm with which the broker is registered. Usually, the broker will make such recommendations because he or she receives some type of compensation or “kickback” from the company selling this product; such conduct is strictly prohibited by the brokerage firm.

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