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Articles Tagged with Dividend Capital

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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:

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Since the writing of the previous blog post “Dividend Capital Total Realty Trust Non-traded REIT Investors Could Recover Losses,” investment fraud lawyers have received communication from investors related to their concerns about the value of their shares. Reportedly, the quarterly dividend rate of these shares is 5.23 percent and the new price of each share is $6.69. The investment’s prospectus for Dividend Capital shares and its recent Securities and Exchange Commission filing indicate new terms for repurchase plans and a major restructuring of the investment. In addition, Dividend Capital Total Realty Trust appears to be going by a new name, Dividend Capital Diversified Property Fund.

Dividend Capital REIT Restructuring Could be a Sign of Trouble

This new offering is purportedly a means for the company to offer liquidity, securities fraud attorneys say. Generally, non-traded REIT shares are illiquid but, when the REIT is liquidated, are sold to another REIT, or goes public, the shares are sold. The SEC filing states that the offering is intended to replenish the capital of their fund shares. As a result, they will not have to list a termination date, should one of the aforementioned events occur. This new plan is scheduled to go into effect on October 1, 2012 and purportedly allows investors to liquidate shares at any time. The price of the shares at liquidation is determined by the company’s Net Asset Value’s daily calculation. However, restrictions on this plan include the following:

  • While Class A, W or I shares may be redeemed at any time, a “Quarterly Cap” has been instituted by Dividend Capital, which will limit redemptions equal to 5 percent of the total Net Asset Value of all shares set upon completion of the prior calendar quarter.
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