Details About the Offering
– Is the securities offering subject to an exemption?
Remember, if it's neither registered nor exempt, it's illegal.
to find out whether they have any information about the company, the offering, and the people promoting the deal.
You can also check with the SEC's Public Reference Room
to see whether the company has filed an offering circular under
Regulation A or a Form D under Regulation D.
If you ultimately decide to invest, find out whether your stock will be restricted in any way.
And be sure to ask how, if at all, you can liquidate your investment if the company does not go public.
Information on the Company
– What are its products and services?
Who are its customers?
Does it have the physical plant, contracts, or inventory it claims to have?
Are audited financials available?
If so, ask for copies and review them carefully.
We've seen over the years that the most successful frauds typically start out with plausible lies.
That's why you should always independently verify claims about any company in which you plan to invest.
Management's Background
– Who runs the company?
Have they made money for investors in the past?
Have any of them violated the law, including any of the federal securities laws?
Your state securities regulator may be able to tell you whether the company and the people who run it have previously defrauded investors.
The Existence and Identity of the Underwriter
– Has the company retained an investment banking firm to underwrite the offering? If so, which firm? Contact your state securities regulator to find out whether the firm has a history of complaints or fraud.
The Identity and Disciplinary History of the Promoter
– How did you find out about the offering? If you heard about it from a stranger or saw a general advertisement, exercise extreme caution. Unscrupulous promoters typically try to lure in as many unwitting investors as possible to maximize their returns. Be sure to check out the disciplinary history of any promoters with your state securities regulator.