Chicago-based Stoltmann Law Offices represents investors who’ve suffered losses from investing in unregistered securities based on the recommendation of their financial advisor. All too often, brokers pitch investors on making a quick profit on unregistered securities. These investments, typically not on the radar screen of regulators, can easily lose money. They can skirt the safeguards of state and federal securities laws.
A group of securities regulators recently launched a crack-down on a company marketing unregistered securities. The North American Securities Administrators Association (NASAA) and the U.S. Securities and Exchange Commission (SEC) jointly announced a “$100 million settlement with BlockFi Lending, LLC (BlockFi) concerning its lending products and practices. Thirty-two state securities regulators have agreed to the terms of a settlement with BlockFi to resolve its past unregistered activities. More jurisdictions are expected to follow.”
The settlement focused on BlockFi’s sales of unregistered securities to retail investors through BlockFi interest accounts (BIAs). “BlockFi promoted its BIAs with promises of high returns for investors who purchased the products. The company took control of and pooled its investors’ loaned digital assets, and exercised sole discretion over the pooled digital assets, including how to use those assets to generate a return and pay investors the promised interest.”
BlockFi is alleged “to have failed to comply with state registration requirements and, as a result, investors were sold unregistered securities in violation of state law and deprived of critical information and disclosures necessary to understand the potential risks of these lending products.”
To settle its past unregistered conduct, BlockFi has agreed to pay $50 million to NASAA member jurisdictions and $50 million to the SEC for a total settlement of $100 million.
Note: Brokers must carefully vet all investments with you to ensure that the investments they are selling meet your financial goals and risk tolerance. Further, advisors are required to perform heightened due diligence on private investments like BlockFi so that they can understand the risks, characteristics, and return objectives of the security prior to recommending it. A financial advisor cannot possible accurately portray an investment to a client unless he or she understands the investments first. Failing to perform this due diligence, or worse, ignoring the red flags present, can result in liability for the firm and financial advisor. Failing to understand the registration status of a security prior to recommending it is an epic failure of due diligence.
Firms are also legally required by FINRA to monitor and supervise what their brokers are selling – their investments must be vetted and authorized by the firms – and have an obligation to investors to fully reveal true risk and return information about the vehicles sold. Broker-dealers and advisors are also required to fully vet all of the investments they are selling to determine if they are suitable for your age and risk tolerance. Investors can file FINRA arbitration complaints if these rules are broken. You can often avoid rogue broker-advisors by checking their backgrounds through BrokerCheck,
If you invested with a broker-advisor and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!