Law Office of Christopher J. Gray, P.C., a New York City law firm handling arbitration claims on behalf of investors throughout the United States, has filed multiple Financial Industry Regulatory Authority (“FINRA”) arbitration proceedings on behalf of investors who allege that registered representatives of LPL Financial Holdings, Inc.’s (Nasdaq:LPLA) brokerage subsidiary recommended unsuitable investments in non-traded REITs.

Suitability claims arise when stockbrokers or investment advisors recommend investments that are not appropriate for an investor’s financial circumstances, risk tolerance, or investment goals. FINRA Conduct Rule 2310 requires that Members and their Representatives have a reasonable basis to recommend a transaction or investment strategy suitable for the customer, based on information obtained through reasonable diligence and the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, time horizon, liquidity needs, and risk tolerance.
Cases filed by the Gray Firm allege that in certain circumstances, LPL lacked a reasonable basis to recommend certain non-traded REITs, including Inland Western REIT (now known as Retail Properties of America. As a private unlisted investment, Inland Western was a Non-Conventional Investment (“NCI”). FINRA’s Notice to Members 03 71 states that “since NCIs often have complex terms and features that are not easily understood,” there exists the potential for customer harm or confusion since investors do not understand the risks involved. Members must conduct appropriate due diligence/reasonable basis suitability before offering these investments to the public. Specifically the Notice states that when offering NCI investments, FINRA Members are required to:
(1) conduct appropriate due diligence to understand the features of these products; (2) perform a reasonable basis suitability analysis; (3) perform customer specific suitability analysis for recommended transactions; (4) provide balanced disclosure of both the risks and rewards associated with the particular product ; (5) implement appropriate internal controls; and (6) train registered representatives regarding the features, risks and suitability of these products.
According to a recent New York Times article, state securities regulators have increased scrutiny on LPL’s sales practices. “LPL is on our radar screen more than any other firm,” said Lynne Egan, who oversees securities regulation in Montana. According to the New York Times article, as LPL has expanded to become the fourth largest brokerage firm in the country, state and federal authorities have censured the company and its brokers with unusual frequency, including for selling complex investments to unsophisticated investors, for speculative trading in customer accounts, and, in a few cases, for outright stealing from clients.

In the last year and a half, state regulators in Illinois, Massachusetts, Montana, Oregon and Pennsylvania have penalized LPL for failing to oversee its brokers properly. Brokers at the company have faced the most common industry reprimand more frequently than brokers at its large competitors since the beginning of 2012, according to a New York Times review of data from FINRA, the industry’s self-regulator.
Both Montana and Massachusetts have pursued LPL for allegedly selling complicated real estate investment trusts, or non-traded REITs, to unsophisticated investors. William F. Galvin, the Massachusetts secretary of the commonwealth, came to a $2.5 million settlement with LPL in February 2013 arising out of LPL’s sales of non-traded REITs to investors in his state. The Massachusetts complaint arose out of $28 million in non-traded REIT sales between 2006 and 2009, which were sold to nearly 600 clients in Massachusetts. According to the Massachusetts Securities Division, 569 of those transactions involved regulatory violations, including violations of prospectus requirements, violations of Massachusetts concentration limits and violations of LPL’s compliance practices. Inland American Real Estate Trust Inc. accounted for the largest amount of sales of all the REITs listed in the complaint. Other REITs discussed in the Massachusetts complaint included Cole Credit Property Trust II, Inc., Cole Credit Property Trust III, Inc., Cole Credit Property 1031 Exchange, Wells Real Estate Investment Trust II, Inc., W.P. Carey Corporate Property Associates 17, and Dividend Capital Total Realty.
According to the Massachusetts complaint, the investigation has “revealed significant and widespread problems with LPL’s adherence with the product prospectus and (state) requirements.” The complaint went on to state that “on paper, LPL set forth stringent requirements for the sale of non-traded REITs. In practice, LPL failed to review properly sales of non-traded REITs. While purporting to conduct a thorough review of offering documents, LPL allegedly overlooked prospectus delivery requirements in numerous sales of non-traded REITs.”
Attorneys at Law Office of Christopher J. Gray, P.C. are available to review possible cases involving unsuitable sales of non-traded REITs. Investors who believe that a financial advisor or stockbroker may have violated their rights in connection with sales of non-traded REITs or other securities may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a confidential, no-obligation consultation.

Shareholders of CommonWealth REIT forced the resignation of a trustee on the company’s board, Joseph Morea, by failing to give him a majority of votes. Undaunted by this rare binding vote by shareholders to force out a board member, the other membesr of Commonwealth’s board simply voted Mr. Morea back into his board seat the very next day. 

CommonWealth’s bylaws required Mr. Morea to resign because he did not get a majority of votes.  However, the bylaws apparently didn’t specifically prohibit the director from being reappointed AFTER resiging.  CommonWealth’s board stated that the shareholder vote resulting in Mr. Morea’s resignation  “appeared not to be directed at any personal failings…but rather to be the result of the positions taken by the board to oppose the hostile takeover efforts.”  

Some CommonWealth shareholders have also complained that the company’s fee structure is rife with conflicts of interest that have led to poor performance, and one analyst has argued that CommonWealth’s  management fee structure encourages the company to concentrate on growing its assets as opposed to improving rents and vacancy.

CommonWealth’s management has taken a series of defensive moves to stave off activist shareholders, including changing company bylaws to make it more difficult for investors to vote out the board.  The company also reportedly lobbied–unsuccessfully–for a change in Maryland law that would have made a hostile takeover more difficult.

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.

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in InnerWorkings Inc. securities. According to recent reports, an investigation is underway to determine whether InnerWorkings and its executives committed federal securities violations and/or breached its fiduciary duty to shareholders.

On April 16, 2013, the Wall Street Journal reported that InnerWorkings projected its first-quarter 2013 results would fall below the expectations of analysts. It claimed a “significant reduction in scope of work at a large retail client” was the reason for cutting the expectations for 2013. Following the news, shares of InnerWorkings fell more than 20 percent in one day, from $14.03 per share to $10.50 per share on April 17, 2013. Furthermore, InnerWorkings now estimates per-share earnings to be 45-50 cents per share, as opposed to the previous forecast of 57-61 cents per share. Revenue projections have also decreased, from $930-$960 million to $900-$930 million.

According to investment fraud lawyers, investors became even more concerned on April 30, 2013, when a report was published by Prescience Point Research Group. The report alleges that InnerWorking shares are grossly overvalued as a result of revenue inflation committed by the company, and in violation of GAAP principles. Allegedly, InnerWorkings misapplied gross revenue accounting which, if true, would violate its credit agreement. The Securities and Exchange Commission had previously filed a letter on November 13, 2012 requesting that InnerWorkings’ service revenue recognition treatment and multiple element arrangement accounting treatment be clarified, according to securities fraud attorneys.

Inner Workings provides print procurement services and is based in Chicago. Reportedly, InnerWorkings posted revenue gains in the double-digits and strengthened per-share earnings every quarter for more than three years until the fourth quarter of 2012.

If you suffered significant losses as a result of your investment in InnerWorkings stock, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

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.

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of conducting business with Anastasios “Tommy” Belesis and other representatives of John Thomas Financial Inc. Specifically, investors in Liberty Silver Corp. and America West Resources Inc. may be eligible to recover their losses. In January of 2013, the Financial Industry Regulatory Authority issued a Wells Notice to Belesis, the CEO of John Thomas Financial. Allegedly, Belesis was part of a pump-and-dump scheme involving Liberty Silver Corp.

A FINRA statement alleged that Mr. Belesis “(1) willfully or recklessly sold a substantial portion of a firm proprietary position while failing to execute customer orders to sell shares of the same stock, at prices that would have satisfied the unexecuted customer orders; (2) failed to follow instructions by the customers to sell the shares; (3) used manipulative, deceptive and/or fraudulent means to artificially inflate the price of the stock; (4) made material misrepresentations, to customers, registered representatives and FINRA, about the reasons why the customer orders had not been executed; (5) falsified or failed to preserve the orders in question and other pertinent records; and (6) failed to reasonably supervise the receipt, documentation and execution of the customer orders.” Securities arbitration lawyers are conducting their own investigation into the sales practices of John Thomas Financial, based on FINRA’s claims.

Bloomberg reported that Belesis has also been accused of fraud related to America West Resources Inc. According to FINRA, John Thomas Financial raised $20 million for America West from 2008 to 2011. Investment fraud lawyers say that when America West stock rose significantly in February 2012, Belesis allegedly prevented customers from selling their shares while he instructed an employee to sell the firm’s stock, gaining the firm over $1 million in proceeds. John Thomas Financial allegedly attempted to disguise the alleged fraud by “losing” the customer order tickets. Currently, no decision has been made in this case.

If you suffered significant losses as a result of your investment with John Thomas Financial, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Securities fraud attorneys are cautioning retirees regarding two potential threats to their retirement investments. Many retirees have suffered significant losses as a result of unsuitable recommendations of risky, illiquid investments. In other cases, losses have resulted from excessive trading in customer accounts.

Reportedly, many seniors are being persuaded to invest in non-traded REITs, or real estate investment trusts, but are not being made aware of the risks and illiquidity of these products. Stock fraud lawyers say that many brokers and advisers with full-service brokerage firms may be tempting senior investors with promises of steady returns that exceed those available in traditional investments such as bonds or CDs while failing to adequately disclose the risks of non-conventional investments such as non-traded REITs.

Many retirees have a low risk tolerance and want conservative, income-producing portfolios.  Advisors often tout the steady stream of income produced by non-traded REITs and present them as an alternative to fixed-income investments such as bonds, but there is no guarantee of ongoing distributions by non-traded REITs.  In fact, distributions may be suspended or stopped completely. Another problem retirees face with REITs is that they may need access to their funds, but redeeming or selling a non-traded REIT may be difficult, or may be possible only at a price much lower than the investor’s initial investment.

Finally, non-traded REITs are often highly leveraged, utilizing borrowed money to invest in real estate.  When, as in 2007 through 2009, real estate prices are dropping, investors in non-traded REITs can face substantial losses of principal.

Some of the non-traded REITs currently being investigated by the securities fraud attorneys at Law Office of Christopher J. Gray, P.C. include KBS REIT, Cornerstone Healthcare REIT, Behringer Harvard REITs, Paladin Realty Income Properties REIT, Wells REIT, Apple REIT, Desert Capital, REIT, TNP Strategic Retail Trust, Dividend Capital REIT, Whitestone REIT, ArciTerra National REIT and Hines REITs.

Other retirees may be suffering losses as a result of excessive trading in their individual retirement accounts, or IRAs, by their financial adviser. One investor recently filed a Statement of Claim alleging excessive trading that exceeded a conservative-to-moderate account’s appropriate turnover ratios. Furthermore, his allegations stated that the trades included unsuitable exchange traded funds, or ETFs, that, like REITs, were too risky given the client’s investment objectives and risk tolerances.

If you are a retiree who suffered significant losses as a result of excessive trading or the unsuitable recommendation of risky non-traded REITs or ETFs, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.

Securities fraud attorneys are currently investigating claims on behalf of the customers of Success Trade Securities who purchased Success Trade promissory notes. In April 2013, the Financial Industry Regulatory Authority (FINRA) announced that it had filed a Temporary Cease-and-Desist Order in relation to these notes. The order is intended to halt fraudulent activity and misuse of investors’ assets and funds allegedly being conducted by Success Trade Securities and Fuad Ahmed, the firm’s president and CEO.

FINRA has issued a complaint against Ahmed and Success Trade Securities that charges promissory note sales fraud. These promissory notes were issued by Success Trade Inc., Success Trade Securities’ parent company. According to the complaint’s allegations, “Success Trade Securities, Ahmed and other registered representatives at the firm sold more than $18 million in Success Trade promissory notes to 58 investors, many of whom are current or former NFL and NBA players, while misrepresenting or omitting material facts. [They] misrepresented that they were raising $5 million through the sale of promissory notes and continued to make this representation, even as the sales exceeded the original offering by more than 300 percent.” According to investment fraud lawyers, FINRA also claimed that Success Trade Securities and Ahmed misrepresented the way in which they would use the proceeds and used the funds improperly, using them to pay existing noteholders’ interest payments and making unsecured loans to the president and CEO.

According to the allegations, Success Trade Securities and Ahmed also failed to disclose to investors the actual amount of the existing debt the company owed investors and the fact that it required raising money from additional investors to make future interest payments. Some of the promissory notes allegedly promised to pay as much as 26 percent interest, while most promised a 12.5 percent annual interest rate payment, due monthly, over the course of three years. Another FINRA allegation was that the exempt status and rate of return of the private placement offering used to sell the notes was misrepresented. Misrepresentations become material and therefore grounds for securities arbitration when it can be proven by a securities fraud attorney that the investor would have made a different investment choice if the misrepresentation or omission had not occurred. This, combined with the sales fraud allegations, suggests that Success Trade promissory note investors may have strong arbitration claims.

If you suffered significant losses as a result of your investment in Success Trade promissory notes, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.

Investors are disappointed, to say the least, that a federal judge recently dismissed an investor class action lawsuit related to the sale of Apple REITs by David Lerner Associates Inc. However, stock fraud lawyers say that this decision will have absolutely no impact on arbitration cases filed against Lerner with the Financial Industry Regulatory Authority (FINRA).

In May 2011, a complaint was filed against Lerner by FINRA, regarding the firm’s Apple REIT marketing practices. In October 2012, FINRA ordered Lerner to pay $2.3 million for allegedly overcharging clients who had purchased other securities. Lerner was also ordered to pay $12 million to the trust investors. Founder and chief executive, David Lerner, was barred for one year from the securities industry and fined $250,000.

The class action raised allegations that Lerner breached fiduciary duty, was unjustly enriched and negligent in the sale of over $6.8 billion in Apple REITs. Though the class action has been dismissed by a federal judge, Lerner still faces many arbitration claims alleging the unsuitable recommendation of Apple REITs. According to securities arbitration lawyers, the question of misrepresentation is completely different than the question of suitability. Even if an investment firm adequately discloses all the risks of the investment, the investment must still be suitable for each investor receiving the recommendation given their age, investment objectives and risk tolerance. Furthermore, in some cases oral misrepresentations at the time of sale- which were not at issue in the class action- can be a basis for liability in a FINRA arbitration if a stockbroker misrepresented the nature of an investment to a customer.

Non-traded REITs have given rise to a significant number of arbitration proceedings alleging that they are that they are risky and illiquid, were unsuitably recommended for sale, or formed an unsuitable over-concentration in an investor’s account at the recommendation of a broker or adviser. Stock fraud lawyers continue to file claims on behalf of investors who purchased a number of non-traded REITs from their full-service brokerage firm, including the Apple REITs sold by Lerner.

If you purchased the Apple REIT or another non-traded REIT that was unsuitable for you at the recommendation of your broker or adviser, 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.

Investment fraud lawyers are currently investigating claims on behalf of customers of Morgan Stanley and other full-service brokerage firms who were the victim of unauthorized trading or discretionary trading on a non-discretionary account without receiving prior written authorization.

According to FINRA’s discretionary rule, “No member or registered representative shall exercise any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member, as evidenced in writing by the member or the partner, officer or manager, duly designated by the member, in accordance with Rule 3010.” However, according to securities arbitration lawyers, this rule doesn’t stop all brokers.

As an example, James Harman McNeill, a Morgan Stanley broker, recently was cited for unsolicited trades and discretion. Allegedly, McNeill violated FINRA Rule 2010 in November 2011 when he exercised discretionary power in Morgan Stanley customer accounts without receiving written authorization prior to doing so. Furthermore, later that month McNeill allegedly marked non-traditional Exchange Traded Fund purchase orders as “unsolicited” even though they were solicited, according to the allegations listed in the Letter of Acceptance, Wavier and Consent that was submitted in March of this year. The Financial Industry Regulatory Authority imposed a 9-month suspension and a $15,000 fine upon McNeill. According to investment fraud lawyers, mis-marked tickets can raise issues regarding inaccurate books and determining if a broker made an unsuitable recommendation.

According to a recent article in Forbes, “not every example of unauthorized trading or mis-marked tickets can be ascribed to time pressure and fatigue. Frequently, bad folks are simply up to no good. Similarly, some folks just won’t listen to reason and no matter how often you warn certain registered persons to avoid shortcuts and go by the book, they figure it’s their lucky day and who’s gonna know and who’s gonna find out — and that’s exactly when bad goes to worse.”

If you believe your stockbroker or investment advisor executed trades on your non-discretionary account without your permission, 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.

According to securities fraud attorneys, many investors may be unaware of the fact that they have suffered losses in non-traded real estate investment trusts, or REITs. Financial statements for REITs usually reflect the investment’s initial purchase price, not the current value of the REIT; this can mislead investors into believing that their investment’s value is stable when, in fact, they have actually suffered significant losses.

Because these investments are unregistered securities, they do not have to follow the same rules that regulated investments must follow. As a result, investors may be subject to high fees both to get in and get out of the investment. Furthermore, non-traded REITs are inherently risky and illiquid, causing them to be difficult to value. Stock fraud lawyers say the nature of these investments makes them difficult to sell, which can cause problems for investors who need access to cash (such as retirees), making REITs clearly unsuitable for such investors.

Unfortunately, even diligent investors who carefully review their financial statements can’t depend on this information to reflect the true value of their non-traded REIT investment. Instead, investors will have to do some research to determine their investment’s value. Securities fraud attorneys are currently investigating many non-traded REITs sold by LPL Financial, Ameriprise Financial and other full-service brokerage firms, including KBS REIT, Inland American, Dividend Capital Total Realty, Cole Credit Property Trust II and III, Wells Real Estate Investment Trust II, Cole Credit Property 1031 Exchange and W.P. Carey Corporate Property Associates 17. For more information on these investigations, see the previous blog posts, “Ameriprise REIT Sales Under Investigation” and “LPL Financial Faces New Complaint Regarding Non-traded REIT Sales.”

If you have suffered significant losses as a result of your investment in a non-traded REIT, or the recommendation to purchase a non-traded REIT was unsuitable given your age, risk tolerance or investment objectives, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 for a no-cost, confidential consultation.