Unsuitable Recommendation of Non-traded REITs and Other Unsuitable Investment Products

by InvestorLawyers on December 5, 2013

in Arbitration,FINRA,REIT,Securities Fraud,Suitability

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of the unsuitable recommendation of risky non-traded REITs and other products by their broker or financial advisor. Last month, another arbitration claim was filed with the Financial Industry Regulatory Authority regarding such risky products.

Unsuitable Recommendation of Non-traded REITs and Other Unsuitable Investment Products

According to the claim, Paul Larsen, a financial advisor, liquidated the claimants’ mutual funds, blue chip stocks and fixed income investments. Allegedly, he told his clients he was doing this to get away from the market risk of these investments. Furthermore, he represented the replacement investments as safe and claimed they would generate income and were opportunities he offered to his “best clients.” However, the products he invested his clients’ funds in were risky, unsuitable investments including:

  • KBS REIT
  • Atlas America Public Fund #14
  • Colorado Water Capital Group LLC
  • Ridgewood Energy Fund S
  • Ridgewood Energy Fund Q
  • Platte Water Group I LLC/Yokam
  • Puritan Capital Group LLC
  • Issacher Global Management LLC
  • UKAG Group LLC

According to stock fraud lawyers, Larsen was eventually fired from the investment firm but, reportedly, his clients were not notified and he was listed as the clients’ broker on their account for just under two years after he was fired. Allegedly, the clients did not find out there were any problems with Larsen until after FINRA barred him from the securities industry permanently.

Typically, non-traded REITs carry a high commission, often as high as 8-10 percent, which motivates brokers to make unsuitable recommendations to their clients. Non-traded REITs such as the KBS REIT are attractive to investors because they carry a relatively high distributions of income on a quarterly or monthly basis. According to securities fraud attorneys, however, these investments are inherently risky and illiquid, and many of them have suffered significant declines in value, resulting in investor losses.

The claim is seeking compensatory damages of over $2 million for negligence, breach of fiduciary duty and misrepresentation. If you suffered significant losses as a result of the negligence, breach of fiduciary duty, misrepresentation, or the unsuitable recommendation of non-traded REITs or other risky, illiquid products, 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 or newcases@investorlawyers.net for a no-cost, confidential consultation.

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