Broker-dealers’ Info Regarding Non-traded REITs is Inadequate, FINRA Says

by InvestorLawyers on May 14, 2013

in Arbitration,FINRA,LPL Financial,Private Placements,REIT,SEC,Securities Fraud,Suitability

Earlier this month, the Financial Industry Regulatory Authority (FINRA) issued a notice to broker-dealers stating that in some cases, they have not provided adequate service to investors in several areas, including the distribution of materials containing inaccurate and misleading statements related to non-traded real estate investment trusts, or REITs. Many securities arbitration claims have been filed by stock fraud lawyers on behalf of investors that cite similar claims.

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The way in which investors receive dividends, or distributions, is one matter that is of concern to securities arbitration lawyers. One of the most attractive reasons for many investors to purchase non-traded REITs is the fact that they begin paying distributions immediately after sale. According to the FINRA notice, however, communications from broker-dealers to investors “have emphasized the distributions paid by a real estate program and failed to adequately explain that some of the distribution constitutes return of principal.”

FINRA also stated that “some communications have not provided sufficient discussions of the risks associated with investing in the products in order to balance the presentation of benefits.” Numerous claims have, in fact, been made alleging independent broker-dealers such as Ameriprise Financial Services Inc. and LPL Financial LLC did not adequately disclose the risks of non-traded REITs to investors prior to purchase. According to stock fraud lawyers, some investors are also not made aware that distribution payments can stop at any time.

This notice is part of an effort to protect investors from losses resulting from misinformation about non-traded REITs. Last month, FINRA indicated that it would be making recommendations to the SEC regarding more stringent rules about the valuation of non-traded REITs. Numerous suitability claims have been filed claiming that brokers and full-service brokerage firms recommended non-traded REITs to investors for whom the products were unsuitable, given their age, investment objectives and/or risk tolerances.

If you received misleading statements regarding non-traded REITs, were not made aware of the risks associated with non-traded REITs or your financial professional recommended the investment despite the fact that it was unsuitable for you, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.

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