Articles Tagged with securities arbitration lawyer

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Securities Litigation Consulting Group of Fairfax, Virginia has estimated that shareholders of non-traded REITs are about $50 billion worse off for having put money into non-traded REITs rather than exchange-traded REITs. The estimate is based on the difference between the performance of more than 80 non-traded REITs and the performance of a diversified portfolio of publicly-traded REITs over a period of twenty years. According to research by the consultancy, the difference in performance between the two asset groups is largely due to the relatively high up-front expenses associated with non-traded REITs.

15.6.15 money whirlpoolNon-traded real estate investment trusts (REITs) are investments that pose a significant risk that the investor will lose some or all of his initial investment. Non-traded REITs are not listed on a national securities exchange, limiting investors’ ability to sell them after the initial purchase. Such illiquid and risky investments are often better suited for sophisticated and institutional investors, rather than retail investors such as retirees who do not wish to have their money tied up for years, or risk losing a significant portion of their investment. Non-traded REITs usually have higher fees for investors than publicly-traded REITs and can be harder to sell.

A partial list of non-traded REITs is as follows (not all of the REITs listed have performed poorly):

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Investment fraud lawyers are currently investigating claims on behalf of the victims of securities fraud perpetuated through schemes such as advanced fee scams. Reportedly, the Securities and Exchange Commission (SEC) has filed charges against Frederick D. Scott, a New York money manager. Scott owns ACI Capital Group, an investment advisory firm. According to the SEC, Scott made false claims regarding the company’s assets under management. He allegedly claimed the assets to be $3.7 million so that he would appear more credible when promoting “too good to be true” investment opportunities.

Allegedly, Scott targeted individual investors and small businesses with multiple financial scams. The SEC claims that he promised high rates of return in order to get money from investors and then stole their money. Reportedly, Scott used investor funds to pay his personal expenses, such as private school tuition for his children, department store purchases, air travel, dental bills and hotels, and his clients never received the promised returns.

According to securities arbitration lawyers, one of Scott’s alleged scams was an advanced fee scheme in which investors were told that the firm would give multi-million-dollar loans after a percentage of the loan amount was advanced to the firm. Reportedly, investors were told they would receive the remaining balance after the loan was made but they never received this sum.

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Securities lawyers are currently investigating claims on behalf of investors whose portfolios held by VSR Financial Services or other brokerage firms contained an unsuitable concentration of alternative investments. Reportedly, VSR Financial Services Inc. is being fined $550,000 by the Financial Industry Regulatory Authority (FINRA) over claims that a reasonable supervisory system was not set up, maintained or enforced regarding non-conventional investment sales.

Firm Fined for Allegations of Inadequate Supervision of Concentrated Client Positions in Alternative Investments

Reportedly, stipulations in VSR’s written supervisory procedures allowed only up to 50 percent of the exclusive net worth of their clients could be invested in alternative investments, unless there was a justifiable reason for exceeding these guidelines. In addition, VSR’s owner allegedly set up procedures that provided a discount through certain non-conventional instruments that artificially lowered the amount of the customer’s liquid net worth that was invested in non-conventional instruments.

However, the Securities and Exchange Commission stated in a letter to VSR that it had found that adequate written procedures had not been established for the program and this deficiency had not been corrected two years after VSR was notified by the regulator of the problem. The SEC also stated that reasonable actions were not taken to ensure the written supervisory procedures were implemented or, if they were not implemented, to eliminate the discount program.

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Investment fraud lawyers are currently investigating claims regarding UBS Securities. UBS Securities has agreed to pay almost $50 million to settle charges that it violated securities laws regarding certain collateralized debt obligation, or “CDO”, investments. The charges apply to the firm’s structuring and marketing of ACA ABS 2007-2 — a CDO, or collateralized debt obligation. Allegedly, UBS failed to disclose the fact that it retained millions in upfront cash while acquiring collateral. The SEC officially charged UBS on August 6, 2013.


The collateral for the CDO was managed by ACA Management and reportedly was primarily consisted of CDS on subprime RMBS, or residential mortgage-backed securities. According to securities arbitration lawyers, the CDO — as the “insurer” — received premiums from the CDS collateral on a monthly basis. Then the premiums were used for CDO bondholder payments. According to the SEC, ACA and UBS agreed that the collateral manager would seek bids for yield that contained both a fixed running spread and upfront cash in the form of “points.”

According to the SEC’s findings, UBS collected upfront payments totaling $23.6 million while acquiring collateral and, instead of transferring the upfront fees at the same time as the collateral, UBS kept the upfront payments and chose not to disclose this information. In addition to retaining the undisclosed $23.6 million, it also retained a disclosed fee of $10.8 million. Investment fraud lawyers say the decision not to disclose the retention of the upfront points was inconsistent with prior UBS deals and the industry standard. Allegedly, UBS’ head of the U.S. CDO group stated, “Let’s see how much money we can draw out of the deal.”

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Investment fraud lawyers are currently investigating claims on behalf of investors who mya have been defrauded through microcap shell company pump-and-dump schemes in light of one of the largest trading suspensions in Securities and Exchange Commission history. In June, the SEC announced that it would suspend trading in 61 companies in the over-the-counter market on the basis that they are ripe for fraud .135963527SEC_Suspends_61_Companies_as_Possible_Too_ls_for_Fraud “The SEC suspended trading in the securities of 61 empty shell companies that are delinquent in their public filings and seemingly no longer in business based on an analysis by the SEC’s Microcap Fraud Working Group,” SEC officials stated in a statement. “Since microcap companies are thinly traded, once they become dormant they have a great potential to be hijacked by fraudsters who falsely hype the stock to portray it as a thriving company and coerce investors into ‘pump-and-dump’ schemes.” Reportedly, these companies were identified in 17 states and one foreign country. Following this suspension, these companies are required to prove they are still operational with updated financial information. However, securities arbitration lawyers say that while these companies became useless to fraudsters once they were suspended, it is difficult for them to identify every shell company that is a possible tool for fraud in time to prevent fraud from occurring. According to investment fraud lawyers, in a pump-and-dump scheme, fraudsters will use false and misleading statements to sell investments in the company, purchasing the stock at a low price, “pumping” the price of the stock higher and then selling the stock at a profit. Previously, the SEC suspended 379 such companies in one day, making this the second-largest suspension in history. A complete list of the 61 companies can be found on the SEC’s website. If you were persuaded to invest in any of these companies by your broker or financial adviser, you may be able to recover your losses through securities arbitration. 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.

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Investors who suffered significant losses as a result of the unsuitable recommendation of Behringer Harvard Multifamily REIT I from a full-service brokerage firm can contact a securities fraud attorney to determine if they wish to pursue legal claims through Financial Industry Regulatory Authority (FINRA) arbitration.

An announcement from Behringer Harvard Holdings LLC stated that affiliates of Behringer Harvard and a board of directors special committee of Behringer Harvard Multifamily REIT I had entered into contractual arrangements, initiating the process of making the REIT self-managed. However, the management team for the REIT will remain basically unchanged. Five of the executives will become employees of the REIT instead of employees of Behringer Harvard. Furthermore, Mark T. Alfieri will replace Robert S. Aisner, who will remain an employee of Behringer Harvard, as the REIT’s CEO.

Typically, non-traded REITs carry a high commission, sometimes as high as 15 percent, which motivates brokers to make unsuitable recommendations to their clients. Non-traded REITs such as the Behringer Harvard Multifamily REIT I are attractive to investors because they carry a relatively high dividend or interest.  However, in some instances brokers have sold the REITs without disclosing the risks of principal loss and/or the fact that the investor’s funds may be tied up for several years due to the limited market for resale of non-traded REIT shares.

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Investment fraud lawyers are currently investigating claims on behalf of individuals who suffered significant losses as a result of the unsuitable recommendation of non-traded REITs and variable annuities from Royal Alliance Securities- and LPL Financial-registered representatives.

Investigations into Unsuitable Sales of REITs, Variable Annuities by Royal Alliance Securities, LPL Financial Representatives

Reportedly, a claim has already been filed on behalf of one investor against Kathleen Tarr, a former representative of Royal Alliance Securities. Allegedly, Tarr recommended taking an early retirement option and then sold the investor unsuitable variable annuities and non-traded REITs. Prior to taking the early retirement option, the investor’s portfolio consisted of diversified retirement investments.

In addition, securities arbitration lawyers are investigating recommendations made by Brian Brunhaver, a former registered representative for LPL Financial. Allegedly, Brunhaver unsuitably recommended the purchase of the non-traded REITs, specifically Inland American and Inland Western, to a client. This client was seeking to make investments that would fund future college expenses. Because of the illiquidity of non-traded REITs, the investments could not be sold in time to meet the client’s needs.

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Investment fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in exotic ETFs, or exchange-traded funds, sold by Morgan Stanley. Recently, Morgan Stanley was ordered to pay $100,000 for its alleged improper sales practices of exotic ETFs to investors. According to New Jersey state regulators, Morgan Stanley did not properly train its advisers, who then sold leveraged and inverse exchange-traded funds to seniors desiring additional income.

Reportedly, the improper sales took place from January 2007 until June 2009. The $100,000 payment includes $10,000 for investor education, $25,000 for investigative expenses of the state and $65,000 in civil penalties. Morgan Stanley has apparently already paid New Jersey investor restitution in the amount of $96,940. However,  investors who suffered significant losses in unsuitable ETFs can still file a securities arbitration claim to recover losses.

In 2012, Morgan Stanley settled FINRA allegations regarding the firm’s handling of exchange-traded funds by paying almost $2.4 million. Reportedly, Morgan Stanley did not have an adequate supervisory system or written procedures in place to ensure compliance with NASD and FINRA rules for inverse and leveraged ETFs from January 2008 until January 2010. Allegedly, Morgan Stanley used the same procedures for oversight of the non-traditional ETFs as they did for traditional ETFs. In addition, investment fraud lawyers say Morgan Stanley-registered representatives did not completely comprehend the non-traditional ETF investments because the firm did not properly train them.

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Investment fraud lawyers are currently investigating claims on behalf of investors who purchased I-Lenders and Energae from Darrell Duane Smith, a former broker for Cetera Advisors (previously known as Multi-Financial Securities). Allegedly, Smith was investigated for “selling away” securities of either I-Lenders and/or Energae to Multi-Financial customers.  “Selling away” is a term describing circumstances when a registered representative or financial advisor associated with a brokerage firm sells securities not sponsored by the brokerage firm to the brokerage firm’s customers.

Customers of Darrell Smith, Cetera Advisors Could Recover Losses

Reportedly, Smith was issued a Cease and Desist Order on April 10, 2013 in connection with his sales of I-Lenders, also known as Interested Investors LLC, and Energae. Following this order, another order was re[prtedly issued on July 3 permanently barring Smith for applying for insurance producer and securities agent licenses and ordering him to pay a $5,000 civil penalty.

Smith’s securities license stated that “after receiving copies of letters written by [Smith] relating to investments in a limited partnership, [Cetera] is reviewing [Smith’s] business to determine whether he had any involvement in limited partnership investments away from the firm without first giving the Firm notice or obtaining the Firm’s approval.” Following this investigation, in March of 2012, Cetera reportedly allowed Smith to resign after “a client alleged he signed a variable annuity application with the client’s consent, which is in violation of the firm’s policies.”

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Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in several TNP-sponsored investments, including the TNP 2008 Participating Notes Program LLC, sold by Berthel Fisher & Co. Financial Services Inc. and other full-service brokerage firms. Reportedly, around $26 million was raised from investors in total for the TNP 2008 Participating Notes Program and, though Berthel Fisher acted as the underwriter for the deal, the investment was also sold by other broker-dealers.

Investors Could Recover Losses for TNP-Sponsored Investments

According to the allegations made by one investor, Berthel Fisher failed to make the proper disclosures and perform adequate due diligence regarding the TNP 2008 Participating Notes Program. A complaint was filed in the U.S. District Court for the Northern District of Iowa on July 8, which stated, “Berthel Fisher had actual knowledge of the misrepresentations and omission in the 2008 [private-placement memorandum] and failed to investigate red flags that pointed to other misrepresentations and omissions.”

The deal’s sponsor, Thompson National Properties LLC, and chief executive Tony Thompson have also been under investigation by securities arbitration lawyers for the TNP Strategic Retail Trust Inc., a non-traded REIT, and the TNP 12% Notes Program. Allegedly, the TNP Strategic Retail Trust was recommended to many investors for which it was unsuitable, given their age, risk tolerances and investment objectives. Reportedly, the 12% Notes Program, which was designed to raise capital for tenant-in-common real estate operations, suspended interest payments to investors and was in danger of defaulting on two loans.

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