Retirees Targeted for Excessive Trading, Unsuitable Recommendation of REITs

by InvestorLawyers on May 7, 2013

in Arbitration,ETF,Private Placements,REIT,Retirement,Securities Fraud,Suitability

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.

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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.

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