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Money MazeFormer financial advisor Thomas Alan Meier (CRD# 1146044), who was most recently affiliated with Morgan Stanley (CRD# 149777), has voluntarily consented to a bar from the securities industry pursuant to a Letter of Acceptance, Waiver & Consent (“AWC”) accepted by FINRA Enforcement on March 19, 2018.  Without admitting or denying any wrongdoing, the Miami, FL based broker consented to the industry bar following FINRA’s investigation and findings concerning allegations of, inter alia, unauthorized trading, unsuitable investments, and overconcentration in energy sector investments.

Mr. Meier’s career in the securities industry dates back to the early 1980’s, including stints at Merrill Lynch, now defunct Thomson McKinnon, Prudential Securities, Citigroup — and most recently, Morgan Stanley — from June 2009 – April 2016.  According to a previously filed Form U5 notice, Mr. Meier resigned from Morgan Stanley in 2016 while “under internal review.”

Pursuant to the AWC, FINRA Enforcement alleged that between July 2012 and March 2016, Mr. Meier made nearly 1,300 stock trades in six customer accounts without permission, yielding Mr. Meier commissions of about $265,000.  Further, FINRA has alleged that these trades cost customers approximately $818,000, as well as more than $2 million in unrealized paper losses.

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financial charts and stockbrokerEffective March 13, 2018, the Financial Industry Regulatory Authority (“FINRA”) imposed an industry bar against former financial advisor Gabriel “Gabe” Block (CRD# 2103543), of Rumson, New Jersey.  FINRA Enforcement’s sanctions stem from a prior Administrative Consent Order (“Order”) entered into on or about June 25, 2015, between the State of Delaware Investor Protection Unit through its Director and Mr. Block’s then employer, Oppenheimer & Co. Inc. (CRD# 249, “Oppenheimer”).

The 2015 Order encapsulates findings of fact and allegations that Block made unsuitable investment recommendations to an investor that earned Mr. Block and Oppenheimer substantial brokerage commissions and fees of $867,900 on approximately $3,023,242 that the investor had invested with Oppenheimer.

Pursuant to the Order, Oppenheimer was assessed a fine of $685,000.  The Delaware Investor Protection Unit found fault with Oppenheimer’s failure to take action, although the subject accounts reportedly appeared on a branch office compliance review report 23 out of the 24 months that the accounts were open.

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investing in real estate through a limited partnershipStrategic Realty Trust, Inc. (“SRT”), formerly known as TNP Strategic Retail Trust, Inc. is a non-traded REIT that owns a portfolio of shopping centers.  SRT has reportedly recently been the subject of a tender offer under which a third-party investor known as MacKenzie Realty Capital has offered to purchase shares for just $3.81/share.  According to SEC filings, the most recent Net Asset Value for SRT estimated by the issuer was $6.27/share.  SRT shares were originally sold at $10 a share to investors, meaning that most investors have likely incurred principal losses.

Over the past several years, many retail investors were steered into investing in non-traded REITs such as SRT by stockbrokers or financial advisors.  Frequent selling points for non-traded REIT investments include presenting these securities as steady income-producing investments and as solid long-term investments due to their underlying investments in real estate. Some investors may not have been informed of the complexities and risks associated with non-traded REITs, including the investment’s high fees and illiquid nature.

Currently, investors who wish to sell their shares of SRT have limited options available to exit their investment position.  For example, SRT suspended its share redemption program effective as of January 15, 2013.  During the years ended 2013 and 2014, SRT did not redeem any shares under the redemption program.  Thereafter, on April 1, 2015, SRT’s Board approved the reinstatement of the share redemption program, but only as it relates to the death or qualifying disability of the shareholder.

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As recently reported, on March 15, 2018, the Federal Energy Regulatory Commission (“FERC”) indicated that it would no longer allow oil and gas pipelines structured as Master Limited Partnerships (“MLPs”) to recover an income tax allowance for cost-of-service rates.  The cost-of-service model particularly impacts those MLPs which operate interstate pipelines in the sector’s midstream.  These MLPs charge customers a regulated price, a portion of which is to cover corporate tax charges.  However, MLPs don’t pay corporate taxes in the first instance, because they are pass-through entities which distribute their pre-tax income to unit holders, who then pay taxes on it according to their own individual situation.

FERC has announced — in the wake of recent tax cuts and a D.C. Circuit Court decision in United Airlines vs. FERC – that for more than a decade MLPs have been able “to recover an income tax allowance in their cost of service.”  In effect, this has served to boost the amount of pre-tax income to be pass through to investors.

While it is unclear as to when any rule issued by FERC will go into effect, perhaps no sooner than 2020, MLPs were adversely impacted in trading.  At one point during trading on March 15, the Alerian MLP ETF (NYSE: AMLP) — which serves to track the MLP sector — was down as much as 10%.  This ETF has lost approx. 18% in the past year.

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Piggy Bank in a CageFinancial advisor Joseph C. Farah (CRD# 2978633), who was most recently affiliated with Gold Coast Securities, Inc. (CRD# 110925) (hereinafter, Gold Coast), has voluntarily consented to a bar from the securities industry pursuant to an Order Accepting Offer of Settlement (hereinafter, the Settlement) entered into on or about January 25, 2018.  Without admitting or denying any wrongdoing, Mr. Farah consented to the industry bar following FINRA Enforcement’s investigation into certain allegations including, inter alia, that Mr. Farah purportedly engaged in excessive trading in a customer’s account, and further, allegedly failed to inform his employer, Gold Coast, that the customer had opened a brokerage account at another broker-dealer at Mr. Farah’s behest.

Beginning in 1998, Mr. Farah began working as a registered representative for Financial Network Investment Corporation in El Segundo, CA.  Subsequently, he worked at National Planning Corporation (CRD# 29604) from July 1998 – September 2002.  From September 2002 until September 2015, Mr. Farah was affiliated with Gold Coast as a registered representative.  In September 2015, Mr. Farah was discharged from his employment with Gold Coast.  According to publicly available information, this termination was due, in part, to allegations raised by FINRA that “[t]he representative had discretionary authority over a customer’s account at another broker-dealer without notifying the firm of his affiliation….”

As alleged in the Settlement, in October 2012 Mr. Farah opened a Gold Coast brokerage account on behalf of a self-employed artist – identified by the initials ‘LN’.  At around the same time, Mr. Farah allegedly suggested that LN also open a brokerage account with TD Ameritrade.  According to FINRA, Mr. Farah allegedly “promised to reimburse LN for any losses in her TD Ameritrade account that exceeded five percent and, in exchange, would take 30 percent of the trading profits as compensation.”

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money whirlpoolFinancial advisor Mark Kaplan (CRD# 1978048), who was most recently affiliated with Vanderbilt Securities, LLC (CRD# 5953, hereinafter “Vanderbilt”), has voluntarily consented to a bar from the securities industry pursuant to a Letter of Acceptance, Waiver & Consent (“AWC”) signed off on by FINRA Enforcement on March 7, 2018.  Without admitting or denying any wrongdoing, Mr. Kaplan consented to the industry bar following FINRA’s investigation and findings concerning allegations of unsuitable and excessive trading in an elderly retail investor’s brokerage account.

According to FINRA records, beginning in 1989, Mr. Kaplan began working as a registered representative for Lehman Brothers.  Subsequently, he worked at CIBC Oppenheimer Corp., Morgan Stanley DW Inc., Citigroup, and Morgan Stanley.  During the course of his nearly thirty-year career, he has been involved in seven customer disputes, each of which concluded with a settlement.

With regard to the AWC, FINRA Enforcement alleged that “Between March 2011 and March 2015 [Mr. Kaplan] engaged in churning and unsuitable excessive trading in the brokerage account of a senior investor” and thus “[v]iolated FINRA Rules 2020, and 2111, NASD Rule 2310… and FINRA Rule 2010.”  FINRA’s findings centered on Mr. Kaplan’s customer, identified in the AWC by the initials ‘BP’, as “[a] 93-year-old retired clothing salesman” who opened several accounts at Vanderbilt with Mr. Kaplan during March 2011.

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Money MazeSierra Income Corporation (“SIC”) recently extended a tender offer to its shareholders, which terminated on December 22, 2017, offering to purchase shares for $7.89 a share.  SIC is a publicly registered, non-traded business-development company (“BDC”).  This non-traded BDC invests primarily in first lien senior secured debt, second lien secured debt, and certain subordinated debt of middle market companies with annual revenue between $50 million and $1 billion.  Investors who participated in the tender offer likely sustained losses on their initial capital investment at $10 per share (exclusive of fees, commissions and any distribution income received).  According to publicly available information, a total of 4,923,026 shares were validly tendered.

According to publicly available information, SIC is externally managed by SIC Advisors LLC, which in turn, is affiliated with Medley Management (NYSE: MDLY, “Medley”).  Medley operates a national direct origination franchise through which it seeks to market its financial products, including SIC.  As of December 31, 2016, Sierra reported that it had raised in excess of $900 million in connection with its equity capital raise.

Investors who purchased shares in SIC’s offering acquired shares at $10 per share.  Further, as outlined in SIC’s prospectus, investors who participated in the offering were subject to hefty up-front fees and commissions of nearly 10%, including a “selling commission” of 7.00%, in addition to a “dealer-manager fee” of 2.75%.

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Wastebasket Filled with Crumpled Dollar BillsAs recently reported, Brandon Curt Stimpson (CRD# 4299623) has been discharged from employment with broker-dealer Allegis Investment Services, LLC (CRD# 168577, hereinafter referred to as “Allegis”).  According to FINRA BrokerCheck, Mr. Simpson’s affiliation with Allegis was terminated on or about December 13, 2017, in connection with allegations that he “[f]ailed to follow firm policies and code of ethics.”

While BrokerCheck does not provide any further information as to Mr. Stimpson’s purported misconduct, a recently reported FINRA customer award appears to shed some light on the issue.  Specifically, on or about March 6, 2018, a panel of FINRA arbitrators issued an award against Allegis and Mr. Stimpson in the amount of $404,182 (the “Award”).  The Award consists of $287,350 in compensatory damages, $53,730 in pre-judgment interest, reimbursement of $20,000 in fees and costs (including expert witness fees), as well as attorneys’ fees in the amount of $60,000 pursuant to Utah case law and statute.

This Award — which holds Allegis and Respondent Brandon Stimpson jointly and severally liable — was rendered following nine hearing sessions in February 2018.  The causes of action raised by Claimant included unsuitability, unauthorized trading, failure to supervise and breach of fiduciary duty, in connection with “[t]he buying and selling of unspecified put options tied to the performance of the Russell 2000 Index.”  According to Claimant’s attorney, Mr. Stimpson allegedly invested more than 25% of Claimant’s portfolio in index options.

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stock market chartAs recently disclosed by the Financial Industry Regulatory Authority (“FINRA”), former Morgan Stanley (CRD# 149777) financial advisor, Kevin Scott Woolf (CRD# 6145312), has voluntarily consented to an industry bar.  Pursuant to a Letter of Acceptance, Waiver and Consent (“AWC”), accepted by FINRA on or about January 26, 2018, Mr. Woolf has consented to sanctions stemming from FINRA Enforcement’s allegations that “[h]e failed to provide documents and information and to appear and provide… on-the-record testimony during the course of an investigation that he engaged in multiple undisclosed outside business activities, including the development of a hotel, and participated in an undisclosed private securities offering for that development project that was marketed to customers of his member firm.”

According to BrokerCheck, Mr. Woolf was affiliated with Morgan Stanley as a registered representative from 2013 – 2016, during which time he worked out of the wirehouse’s Winter Haven, FL branch office.  According to the allegations set forth in the AWC, it would appear that Mr. Woolf was permitted to voluntarily resign from Morgan Stanley on or about June 2016, based upon the brokerage firm’s internal review of Mr. Woolf’s “potential outside business activity related to a securities offering for a real estate investment.”

Based upon applicable securities laws and industry rules and regulations, a stockbroker or financial advisor is prohibited from engaging in conduct that amounts to “selling away,” or selling securities to his or her customers without prior notice to or approval from the broker’s firm.  A registered representative who engages in such activity does so in violation of NASD Rule 3040, in addition to FINRA Rule 3280.  As stated by the SEC, NASD Rule 3040 is designed to protect “investors from the hazards of unmonitored sales and protects the firm from loss and litigation.”

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Money MazeReal estate investment firm MacKenzie Realty Capital (“MacKenzie”) is offering to purchase shares of The Parking REIT, Inc. (f/k/a MVP REIT II, Inc., hereinafter “The Parking REIT”) for $12.17 per share.  The pricing of MacKenzie’s unsolicited tender offer suggests that investors who wish participate in order to generate liquidity will lose money on their investments based on their initial purchase price.

As recently reported, The Parking REIT has merged with MVP REIT, Inc. (“MVP REIT I”), and as a result of the merger, the newly formed entity holds a real estate investment portfolio consisting of 44 parking facilities across 15 states, with an estimated aggregate asset value of $280 million.

The Parking REIT is a publicly registered non-traded real estate investment trust (“REIT”).  Unlike exchange traded REITs, non-traded REITs are particularly complex and risky investment vehicles that — as their name implies — do not trade on a national securities exchange.  Unfortunately, retail investors are often uninformed by their broker or money manager of the illiquid nature of non-traded REITs.  Investors may be unaware that their options to sell shares  are limited and often disadvantageous as to pricing and timing, and generally include direct redemption with the issuer, potential sale of shares through a fragmented and illiquid secondary market, or in limited instances — a tender offer by a third-party.

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