Registered and Unregistered Securities & Signs of Possible Fraud

Last updated: September 13, 2017

Securities: Registered and Unregistered and the Warning Signs of Possible Fraud

SECURITIES* - REGISTERED OR UNREGISTERED                 

Every securities product offered for sale in Kansas must be registered with the Office of the Kansas Securities Commissioner (KSC), OR it must qualify for an exemption from registration under Kansas or Federal (Securities and Exchange Commission) securities laws and regulations.

Exempt Securities and transactions include:

                1) Federally registered securities including mutual funds and securities traded on the most prominent stock exchanges;

                2)  Securities issued or guaranteed by governmental entities, banks, insurance companies or public utility companies; and

            3) Private Placement Offerings.  These securities are not registered but must be offered in compliance with exemption requirements. Unregistered securities are often considered riskier investments.                

 Common Exempt Offerings in Kansas include the following: 

•             Limited Offering – Single issue of securities to no more than 25 purchasers in a 12-month period, when offered without general solicitation or payment of commissions to unregistered persons. 

•             Invest Kansas Exemption (IKE) – this exemption helps small businesses formed in Kansas to raise up to $1 Million in a 12-month period. Individual investors may not invest more than $5,000 unless they are accredited investors.

•             Other common Kansas exemptions include the Accredited Investor, Institutional Investor, Existing Security Holder, Employee Benefit Plan, and Kansas-based Oil and Gas exemptions. 

Please refer to the Kansas Securities Commissioner's website at www.ksc.ks.gov for further details.      

SECURITIES FRAUD - WARNING SIGNS OF A POSSIBLE FRAUDULENT UNREGISTERED OFFERING 

The following are some of the warning signs associated with an unregistered offering by unregistered individuals that are considered typical indications of securities fraud: 

•             Statements claiming huge rewards with NO RISK.

•             Forceful sales pitch creating a sense of immediacy.

•             The appearance of a one person show with no brokerage firm, accountant, etc. involved in the private placement.

•             No requirement of a certain net worth or income requirement for investors.

•             Lack of documentation on proposed, unregistered offering – A private placement memorandum or prospectus will accompany legitimate private or exempt offerings.

•             Unsolicited phone and mail offerings.   

When in doubt, the simplest thing to do is to make a call to the Kansas Securities Commissioners Office at (785) 296-3307, to ask about the securities offering you are considering and the persons offering or recommending the securities to you.

*Securities include common stocks, bonds and notes, LLC interests, interests in oil & gas and options to buy or sell securities. 

Photo by Tran Mau Tri Tam on Unsplash

This article is published on KansasMoney.gov. Find more information by contacting these state agencies: