Private Equity Investors Beware

| June 7, 2016 | 401(k) Mismanagement, Investment Fraud

Private equity conjures up images of billionaires investing in success stories like Facebook and Tesla. Often, though, private equity investments come from retired persons who have labored a lifetime accumulating wealth for their golden years.  But when seniors fall prey to investments like Prometheus Law PLCMGMT LLC and Metropolitan Coffee and Concession, their golden dreams unfortunately turn into investment nightmares.

In recent years, the SEC has stepped up its efforts to pursue private equity fraud.  Just recently, the SEC charged a Los Angeles-based litigation marketing company and its co-founders with defrauding retirees and other investors who were told their money would be used to help gather plaintiffs for class action and other lawsuits and they would earn hefty investment returns from settlement proceeds.

The SEC has also pursued private equity funds over unstated fees and expenses, impermissible shifting of fees and expenses, and advisers who fail to disclose conflicts of interest regarding fees. Last year, the SEC fined and banned an adviser of a private equity fund for not properly disclosing to investors — many of whom were retired — that companies in which the fund invested were paying a fee to the adviser to invest in the company.

Despite the SEC’s efforts, too many investors of all ages continue to fall prey to high pressure pitchmen hawking investments that are unsuitable or have steep sales commissions, high surrender charges or tax consequences. All too often these pitchmen tout themselves as investment experts when their only expertise is to separate the public from its money.  Here are a few tips to consider before you turn over your hard-earned money:

  • Search the adviser’s background on FINRA’s BrokerCheck or the SEC’s Investment Adviser Search websites.
  • Investment seminars and “free lunches” are designed to sell, not to educate.
  • Don’t be taken in by claims of “urgency.”
  • If the claims are too good to be true, they are.

If you run into trouble, please call the offices of Sanford Heisler Sharp.  We have lawyers experienced in investment fraud who can help.