Desert Capital REIT Investors Could Recover Losses

by InvestorLawyers on July 9, 2012

in Arbitration,FINRA,Retirement,Securities Fraud,Suitability

Investment fraud lawyers are currently filing claims on behalf of investors who suffered significant losses as a result of their investment in Desert Capital REIT. Recently, a claim was filed on behalf of two individuals. Both of these investors were retirees, ages 81 and 88. The claim, which is seeking $130,000 in damages, was filed with the Financial Industry Regulatory Authority (FINRA).

Desert Capital REIT Investors Could Recover Losses

The claim alleges that the Calton representative who solicited the Desert Capital REIT investment to the claimants was aware that the investors were retired and represented the investment as an income-producing, low-risk investment. Allegedly, the representative stated the REIT had a good reputation of paying dividends and would, therefore, be a good addition to the income-producing portfolio of the claimants. The claimants could not afford an illiquid, high-risk, speculative investment because their only source of income came from their investments and social security.

Securities fraud attorneys have stated that since REITs are, in fact, illiquid, non-traded investments, many REITs are not a suitable investment for all investors. FINRA rules have established that firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation. Furthermore, brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer. The claim states that the Calton representative and the firm itself did not perform the necessary due diligence and misrepresented the risks of Desert Capital REIT.

Investment fraud lawyers believe there may be other investors who suffered losses as a result of similar circumstances to the recent claim filed with FINRA on behalf of these two retirees. Desert Capital REIT invested in loans to developers and builders to buy, build and develop on residential or commercial land, as opposed to traditional residential mortgages. As a result, the investment carried much more risk than what would be found on traditional mortgages. Desert Capital began to experience substantial borrower defaults near the end of 2007. Almost all of the investment’s borrowers had defaulted by 2008 and 2009. As a result of the REIT’s eventual bankruptcy, $130,000 was lost by these two investors alone.

If you suffered significant losses as a result of your investment in Desert Capital REIT, or another REIT, you may be able to recover losses through securities arbitration. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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