by Howard Haykin

Woodbridge Securities proved to be a $1.2 billion Ponzi scheme, which claimed between 8,400 and 10,000 victims - many of them elderly. AND MAKE NO MISTAKE, the victimized investors did not purchase the fraudulent promissory notes. These unregistered securities were sold by veteran brokers - each with over 20 years’ experience. Like the …

REFLECTING ON INVESTOR SAFEGUARDS.    A Private Securities Transaction (“PST”) is any securities transaction relating to new offerings of securities which are not registered with the SEC. While brokers are required to receive permission from their firms in order to participate in a PST, many brokers do so anyway without notifying their firms - as happened in the Woodbridge Ponzi scheme. Broker's violate the rules, in part, because their firms are not likely to give them permission to participate, and because brokers do not expect they will be caught. 

That said, the risks are all too real – if not amplified - by unregistered securities offerings. First, they typically are not supervised, meaning the issue of 'suitability' falls on the sole judgment of the broker (who admittedly is biased). Second, there's no one to conduct adequate due diligence - to see that "all the I's are dotted, and T's are crossed."

As a result, PST investors should consider their own safeguards, which might include the following: