Investment fraud lawyers note that independent broker-dealers have a responsibility to perform adequate due diligence when selling any investment, especially complex, illiquid products. Since the 2008 market collapse, FINRA has been aggressive with broker-dealers who failed to do so. Axelrod stated to the Securities Industry and Financial Markets Association’s Complex Products Forum that, “FINRA examiners have noted that in the instances of REITs that have experienced financial difficulties, red flags existed and should have been considered by firms prior to the product being offered to firm clients.”

Another problem with non-traded REITs, according to Axelrod, is that “non-traded REITs may also borrow funds to make distributions if operating cash flow is insufficient, and excessive borrowing may increase the risk of default or devaluation. In addition, non-traded-REIT distributions may actually be a return on principal.”

Some of the non-traded REITs currently being investigated by the stock fraud lawyers at Christopher J. Gray are Inland Western, Inland American, KBS REIT, Cornerstone Healthcare REIT, Behringer Harvard REIT, 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 CNL Lifestyle Properties REIT.

If you suffered significant losses as a result of your investment in a non-traded REIT, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

REIT Investments like the ArciTerra National REIT typically offer commissions between 7-10 percent, which is significantly higher than traditional investments like mutual funds and stocks. In some cases, the commission generated by these investments can be as high as 15 percent. This higher commission can explain why brokerage firms are motivated to recommend these investments despite their possible unsuitability.

Stock fraud lawyers are investigating the possibility that brokerage firms may be held liable for the recommendation of ArciTerra National REIT. Financial Industry Regulatory Authority rules have established that brokers and firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Non-traded REITs are illiquid and inherently risky and, therefore, not suitable for many investors.

Furthermore, the ArciTerra National REIT reportedly offered private placements in order to raise capital. These private placements were then offered by broker-dealers registered with the Financial Industry Regulatory Authority. According to investment fraud lawyers, because private placements are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors.

If you suffered losses in the ArciTerra National REIT, another risky REIT, or were unsuitably recommended private placements, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.