Subscribe to our mailing list

* indicates required







We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.


Stay Informed with the latest fanancialish news.




Investments - Private

Investing in Private Securities Transactions

October 24, 2019

by Howard Haykin



A Private Securities Transaction (“PST”) is any securities transaction relating to new offerings of securities which are not registered with the Securities and Exchange Commission (the “SEC”). A broker may participate in a PST only after receiving permission from their firm.



A broker was recently barred from the industry after he engaged in undisclosed and unapproved private securities transactions. Without telling his brokerage firm, Foresters Equity Services, this broker sold over $2.7 million in promissory notes that were issued by the Woodbridge Group of Companies, a purported real estate company. The broker earned $110,000 in commissions; his customers soon lost everything, when Woodbridge filed for bankruptcy and the promissory notes became worthless.



SAFEGUARDS FOR PRIVATE SECURITIES TRANSACTIONS.    Securities rules and regulations are designed to safeguard investors who purchase PSTs from registered brokers. Firms that permit their brokers to participate in PSTs and earn commissions on these offerings are required to supervise their brokers’ activities and to keep a record of all sales - as if the transactions were executed on behalf of the firm. Unfortunately, Foresters Equity Services was never alerted and did not provide oversight.


Because many brokers don’t care about the prohibitions and figure that no one would find out about their outside sales, investors should be prepared to devise their own safeguards. Here are 2 such safeguards:


  • Don’t invest in a private securities transaction unless your broker or financial adviser has assured you that he or she received firm approval. [Note: If you don’t trust your broker to tell you the truth, contact the a branch manager and think about switching to a new broker.]


  • Before investing, get advice from a trusted independent individual or financial watchdog - someone who can help decide whether the particular PST offering is legitimate and fits you investment profile.



[Click on FINRA Rule 3280 for details on PSTs by Associated Persons of Broker-Dealers.]

[Click on FINRA AWC #2018057766401 for details on this particular case.]