Reuters: Regulatory News: US regulator warns investors against pre-IPO fraud

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US regulator warns investors against pre-IPO fraud Apr 24th 2012, 23:11 Tue Apr 24, 2012 7:11pm EDT * SEC alerts public about pre-IPO investment scams * Says is aware of "a number of complaints" * Alert comes weeks after capital-raising law passed By Alexandra Alper WASHINGTON, April 24 (Reuters) - The U.S. securities regulator warned investors on Tuesday to beware of scams offering shares of hot tech companies such as Twitter and Facebook that have not yet gone public. The alert, posted on the Securities and Exchange Commission's website, said that, while legitimate offerings of pre-IPO shares are not uncommon, they generally are limited to sophisticated investors. The SEC said it is "aware of a number of complaints and inquiries about these types of frauds, which may be promoted on social media and internet sites, by telephone, email, in person, or by other means." The SEC pointed to pre-IPO schemes in recent years as reason for concern. Earlier this month, the U.S. District Court for the Southern District of Florida in Miami i ssued an order in a bid to halt an allegedly fraudulent sale of securities of an investment vehicle that purportedly held pre-IPO shares of Facebook. The SEC's warning also comes just weeks after President Barack Obama signed into a law a bill making it easier for firms to raise capital and solicit investors. Some SEC officials, Democrats, and industry watchdogs have sharply criticized the law for rolling back critical shields that protect unsophisticated investors from securities fraud. The law, which was held up as a job-creation bill, will make it easier for companies to solicit private investors and relaxes filing requirements associated with initial public offerings. It also allows startup companies to engage in crowdfunding, in which investors take small stakes in companies over the Internet. Link this Share this Digg this Email Reprints

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