Sales of a company’s pre-IPO shares to retail investors can spell trouble, said the deputy chief of the SEC’s complex products unit on Wednesday.

“If you sell financial products where the value is dependent on whether or not a company like Uber goes public, it is probably going to be a securities-based swap which needs to be registered with the SEC and traded on an exchange,” said Reid Muoio, the agency’s deputy chief of the complex financial instruments unit, speaking at the Financial Industry Regulatory Authority’s annual conference in Washington, D.C.

The SEC enforcement unit executive said a major problem with alternative investments is that there is a knowledge gap between the people who are developing them and the people who are selling them.

He noted that attorneys and sales forces involved often don’t understand the investments well and aren’t able to explain them clearly to investors.

“It’s a guarantee investors are not going to get complete information,” Muoio said.

Sara Grohl, Finra’s director of emerging regulatory issues, said at a conference seminar on alternative investments that investors are looking at them not just for higher yields but to reduce volatility and taxes as well.

She warned, however, that liquid alt funds tend to underperform the S&P 500 and have higher fees.

She said another danger is that these investments are young, so they have not shown how they perform in periods of market stress.