On October 27, 2015, Vanguard Funds (Vanguard) filed suit against VEREIT, Inc. (VEREIT), VEREIT Operating Partnership, AR Capital, ARC Properties Advisors, RCAP Holdings, RCS Capital Corporation, and five company executives in Arizona federal court.

15.10.21 building explodes

VEREIT (formerly known as American Realty Capital Properties)  is one of the largest real estate investment trusts (REITs) in the world.  VEREIT was founded in 2010 and is based in Phoenix, Arizona.

In the complaint Vanguard alleges that VEREIT cost investors billions of dollars in a multiyear accounting fraud.  From February 2013 to July 2014 VEREIT implemented an “acquisition strategy”  purchasing seven major real estate companies at an average of $3 billion.  VEREIT’s assets grew from $132 million to $21.3 billion in 2014.  During this growth VEREIT allegedly  assured investors that its internal controls “were effective” and that the company financial statements “were accurate and could be trusted.”

Investors allege that VEREIT actually did not have an adequate system of controls over its financial reporting and that company financial statements were “riddled with errors.”  According to the complaint VEREIT  hid its fraud from investors until Oct. 29, 2014 when it disclosed an audit report which “determined that the company ‘intentionally’ misreported and [had] ‘intentionally not corrected’ certain calculations and that prior statements by the company ‘should no longer be relied upon.”  After the revelation VEREIT’s stock price fell by 36%.

Non-traded REITs, like VEREIT, carry greater risk than more traditional investments such as stocks and bonds.  Because of the greater risk attached to these investments, they are better suited for sophisticated and institutional investors.  Broker-dealers have the duty to conduct proper due diligence in order to determine if an investment is suitable for a customer.  This includes looking  at the investors age, risk tolerance, net worth and investment experience.

If you believe you have been the victim of a possible violation of the securities laws, you may wish to consult an attorney to find out more about your legal rights and options. Investors may contact a securities attorney at Law Office of Christopher J. Gray at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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According to the Financial Industry Regulatory Authority (FINRA), former Cadaret, Grant & Co. (Cadaret) broker William M. Pottetti (Pottetti) was barred from the securities industry after he agreed to sign a Letter of Acceptance, Waiver and Consent (AWC) for allegedly converting funds from a client.

15.10.21 bags of money

Pottetti has been registered with the securities industry since 1983.  He has previously been registered with Citicorp Investment Services from 2004-2006; HSBC Securities, Inc. in 2007; Chase Investment Services Corp. (Chase) from 2007-2012; J.P. Morgan Securities, LLC. in 2012 and most recently with Cadaret from 2013-2015.

FINRA began its investigation on Pottetti in 2011 while he was working with Chase.  Pottetti allegedly made a recommendation that a firm customer invest in a company, that Pottetti started, that treats gray hair.  The client invested $50,000 with Pottetti, but according to the AWC, Pottetti never invested the funds into the company he recommended.  Instead, Pottetti allegedly used the funds for his own personal use, and the customer was returned only $5,000 of her initial investment.

Brokerage firms have a duty to properly supervise all registered representatives with their firm. Firms also have a responsibility to make sure that financial advisors are following all securities rules and regulations as well as internal firm policies. If a brokerage firm fails to adequately supervise its registered representatives, the firm may be liable for losses suffered by investors.

If you believe you have been the victim of stockbroker misconduct, you may wish to consult an attorney to find out more about your legal rights and options.  Investors may contact a securities arbitration attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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Reef Oil and Gas Investments May Give Rise To Investor Arbitration Claims

December 9, 2015

Law Office of Christopher J. Gray wishes to alert investors to the possibility that recommendations of Reef Securities, Inc. (Reef) by broker-dealers may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation. Reef, a Texas based company, is an independent oil and gas company […]

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Former UBS Broker William Hightower Barred From Securities Industry

December 9, 2015

According to the Financial Industry Regulatory Authority (FINRA), former UBS Financial Services, Inc. (UBS) broker William Hightower (Hightower) was barred from the securities industry over failure to respond to regulatory requests concerning his alleged unapproved and undisclosed private securities transactions. In its investigation, FINRA noted that Hightower allegedly failed to provide a list of customers […]

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Former Morgan Stanley Broker William Matthew Kelley Barred From Securities Industry

December 9, 2015

According to the Financial Industry Regulatory Authority (FINRA), former Morgan Stanley & Co. (Morgan Stanley) broker Matthew Kelley (Kelley) was barred from the securities industry over failure to respond to regulatory requests concerning his alleged unapproved and undisclosed private securities transactions. Kelley has been registered with the securities industry since 2007. He has previously been […]

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Great Basin Scientific, Inc. Investigation

November 18, 2015

Great Basin Scientific, Inc. (Great Basin) is a biotechnology company that, according to its website, “commercializes technologies that improve ease-of-use and delivers sample-to-result molecular diagnostic testing.” It trades on the NASDAQ exchange under the ticker symbol “GBSN”. Great Basin was underwritten by Dawson James Securities Inc. (Dawson James), a boutique investment bank out of Florida, […]

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Broker Robert Turpin Discharged By Source Capital

November 18, 2015

According to the Financial Industry Regulatory Authority (FINRA), broker Robert Turpin (Turpin) recently had his registration with his brokerage firm, Source Capital Group, Inc. (Source Capital), terminated for allegedly participating in “selling away” or engaging in unapproved and undisclosed outside business activity. Turpin has been registered with the Securities Industry since 1985. He has previously […]

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Recommendations of United Mortgage Trust May Give Rise To Arbitration Claims

November 17, 2015

Law Office of Christopher J. Gray wishes to alert investors to the possibility that recommendations to purchase shares of United Mortgage Trust (United Mortgage) real estate investment trust (REIT) by broker-dealers may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation. Non-traded REITs, like […]

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Family Endowment Partners and Broker Lee Weiss Charged With Defrauding Clients

November 17, 2015

On September 29, 2015, the Securities and Exchange Commission (SEC) filed charges against Family Endowment Partners, LP (FEP) and broker Lee D. Weiss (Weiss), alleging self-dealing and failure to disclose material facts to clients. Weiss and FEP allegedly urged clients to invest more than $53 million in illiquid securities to the benefit of Weiss and […]

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Halcon Resources Investment Losses May Give Rise To Arbitration Claims

November 17, 2015

Law Office of Christopher J. Gray wishes to alert investors to the possibility that recommendations of Halcon Resources Corporation (Halcon) by broker-dealers may be unsuitable, depending on the individual characteristics of investors and whether the broker had a reasonable basis for the recommendation. Halcon, a Texas based company, is an independent oil and gas company […]

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