Extreme volatility in the stock markets may lead fraudsters to launch scams in the private market, the North American Securities Administrators Association (NASAA) is warning.
The group of state and provincial regulators told a meeting of the U.S. Securities and Exchange Commission’s (SEC) investor advisory committee that it’s worried about possible investor exploitation involving sham private offerings related to the Covid-19 outbreak.
“Because private securities transactions… are not subject to review by federal or state regulators, these offerings are a vector for fraudulent offerings to masquerade as all types of investment opportunities,” said Christopher Gerold, president of NASAA and chief of the New Jersey Bureau of Securities, in a statement.
Gerold told the SEC’s investor advisory committee that NASAA regulators are concerned people will be pitched on private placements “because they appear more stable because there is no secondary market, and they are not being re-priced on a daily basis the same way that public securities are.”
He also said the SEC should be “deeply concerned that we have no real picture of what is occurring in the private markets.”
Recently, NASAA called on the SEC to halt plans to expand retail investor access to private market offerings, and Gerold reiterated that stance.
He also told the committee that NASAA’s board of directors has established a Covid-19 working group to help coordinate their responses to issues that arise and to connect with other regulators.
Source: Investment Executive