Now, the former chairman, Mark F. Spangler, an investment adviser in Seattle, is being accused by the federal authorities of committing securities fraud when he put his clients’ money into investments in private companies without their consent. In an affidavit to support a search warrant of Mr. Spangler’s home, a Federal Bureau of Investigation agent claimed that he also created false statements and failed to disclose that he had an interest in two of the companies in which he invested clients’ money. One of those companies went out of business this year.

Here’s a little background: The investments at issue are so-called private placements, meant for sophisticated investors who are aware that they could make a lot of money but also that they could lose it all. In this case, the F.B.I. estimated losses of at least $46 million out of the $106 million that Mr. Spangler managed.

Ronald J. Friedman, the attorney representing Mr. Spangler, said his client had been cooperating with the federal investigation and had not been charged. He declined to give Mr. Spangler’s version of what happened or make him available for comment. A court-appointed receiver has been named to try to recover whatever assets remain.

“We’re at the front end of this,” Mr. Friedman said. He added that the allegations had “raised interesting questions about discretionary authority in accounts.”

All investors should ask how much they should trust their advisers. But for the wealthy, in particular, the case underlines the serious risks of investing in private placement deals. Whether they are set up to invest in real estate, private companies or particular types of securities, private placements are created to finance someone’s enterprise. That enterprise is usually undervalued or poised for growth. But it should be a given that it may not play out as planned.

Susan John, the current national chairwoman of the National Association of Personal Financial Advisors, said she served on the board with Mr. Spangler in the 1990s and had known him for 20 years. The organization says it prides itself on transparency.

“He was perhaps one of the strongest believers in standards for Napfa,” she said. “So it’s very difficult for me to see how he could have evolved into the person that these allegations would lead you to believe he had become.”

She said Mr. Spangler did a series of presentations showing that returns in private placements were better than in public companies for his clients, many of whom had become wealthy from stock in Microsoft and Starbucks.

In the F.B.I. agent’s affidavit, several of Mr. Spangler’s clients said that he had shown them documents saying they were putting their money in funds that would invest in publicly traded securities, but their money was put into private companies.

Because these private placements carry the risk that all the principal will be lost, most advisers recommend them only for their wealthiest clients, whose financial lives will not be affected by the loss. Mr. Spangler’s clients said in the affidavit that they told him they did not want to take any big risks with their money.

But even when clients agree to the risks, they need to look for red flags that the deal may not work or pay the returns they expect.

Perhaps the biggest one here was that Mr. Spangler was associated with the companies in which he invested clients’ money. Clients said they were not told that he was on the board of TeraHop Networks, the company that went out of business, and Tamarac Inc., which provides software for financial advisers.

With any legitimate private placement, the person offering it will provide a memorandum that discloses how the company is structured and how the promoters of the deal are paid. The memorandum should also lay out how a person’s money will be invested, what returns can be expected and what fees will be charged. Getting a lawyer or certified public accountant to read through this is crucial.

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