What an Individual Needs to Know When Soliciting Investment in Massachusetts

The growing force of cross border equity investment, whether with respect to EB-5 immigration projects or other emerging businesses, have created alarming and ample opportunities for companies and individuals to violate Securities law.

Just recently, I am handling several investment disputes, when the company misrepresented material information that the investor relied on when making the decision. In all these cases, individuals working as the investment agents facilitating the investment and getting commission are not registered with the State government.

In Massachusetts, an individual who is getting paid by engaging in selling, effecting and soliciting securities or offers investment advice shall pass professional exams and register with Massachusetts Securities Division. Different rules apply to person who works for a Financial Industry Regulatory Authority (FINRA) registered company and those who are not FINRA registered company. Almost all financial service or broker dealers are FINRA companies. Narrow exception applies.

“Security” could be a lot of things. The most common ones are stock, equity ownership in any business and EB-5 investment. They may also be partnership interest in LLC, LP or LLP. Promissory notes, investment in real estate or derivative may also be counted. A lot of people become investment advisors by accident, most times, not even knowing their activities shall be governed by State securities agency. It is irrelevant what your title is on the business card, it is your actual activities that define whether you are investment agent or advisor. Failure to register may cause government to stop your activity and/or impose penalties. Federal Securities regulations have separate requirements.

Investment broker or advisor cannot intentionally or negligently misrepresent the investment opportunity. Meaning, they shall not lie about any material aspect of the company that investor rely on in making investment decisions. Neither can they lie about a known fact nor can they omit material information. Penalties could be administrative injunction, repay the investors capital they invested, or even criminal liabilities.