Exempted offerings include securities offered exclusively to selected and sophisticated investors. Publicly held entities are strictly regulated by the SEC and must comply with established reporting requirements. Protection Against Fraud. Fraudulent offerings and transactions of securities are strictly penalized. Deception and factual omissions in the registration statement, promotion or transfer of securities amount to fraud under the regulations.
Full disclosure requires that the risks inherent in the investment be identified.
As a general rule, the offering entity is obligated to provide potential investors with all reasonable information pertaining to the securities offering. Misleading the investing public with omissions is as culpable as deceitful sales tactics. Management, officers or owners of the offering entity risk personal liability if the SEC uncovers fraudulent practices. Criminal actions are also available to the SEC to enforce securities regulations. Honest and accurate disclosure is the best means to protect the securities promoter from allegations or charges of fraud.