Investors in certain oil and gas limited partnerships offered and underwritten by David Lerner Associates, Inc. (“David Lerner”) — including Energy 11, L.P. (“Energy 11”) and Energy Resources 12, L.P. (“ER12”) — may be able to recover investment losses through FINRA arbitration, in the event that the investor’s broker lacked a reasonable basis for the recommendation, or if the nature of the investment including its many risk components was misrepresented by the financial advisor. Energy 11 is a Delaware limited partnership formed in 2013 “to acquire producing and non-producing oil and natural gas properties onshore in the United States and to develop those properties.” Specifically, as of March 31, 2017, Energy 11 had made key acquisitions in certain Sanish Field Assets (for approx. $340.5 million) located in North Dakota in proximity to the Bakken Shale.

ER12 was formed in 2016 as a Delaware limited partnership, with essentially the same objective as Energy 11, namely to “acquire producing and non-producing oil and gas properties with development potential by third-party operators on-shore in the United States.” On February 1, 2018, ER12 closed on the purchase of certain Bakken Assets, including a minority working interest in approximately 204 existing producing wells and approximately 547 future development locations, primarily in McKenzie, Dunn, McLean and Mountrail counties in North Dakota.

Structured as limited partnerships, both Energy 11 and ER12 carry significant risks that may not be adequately explained to retail investors in marketing pitches by financial advisors who may recommend these complex financial products. To begin, both Energy 11 and ER12 were only recently formed (2013 and 2016, respectively) and have very little operating history. Moreover, each limited partnership is helmed by a CEO and CFO, Glade Knight and David McKenney, whose primary experience is in the real estate industry, not the oil and gas arena. Oil and gas investments by their very nature are extremely volatile as they are subject to the boom and bust cycles which characterize the oil market.

Perhaps of greatest concern to investors in oil and gas limited partnerships like Energy 11 and ER 12 is their illiquid nature. Investors in the common units of either Energy 11 or ER12 cannot readily or easily sell their units, as there is no public market on which these units trade. Rather, investors must be able to hold their investment position indefinitely, until such time as a Liquidity Event may occur, which will likely only occur “within five to seven years from the termination” of the investment’s offering, at the earliest.

When a broker and/or brokerage firm recommends an oil and gas investment to a client, the financial advisor should first ensure that the investor is aware from the outset of the volatile nature of an oil and gas investment. Further, the financial advisor has a duty to determine if the investment is suitable in light of the investor’s profile and stated investment objectives. In addition, in instances where an investor’s account becomes over-concentrated in oil and gas investments, or if a broker fails to disclose the risks associated with such an investment or investment strategy, the broker and his or her firm may well be held liable for losses on the investment.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes concerning oil and gas investments, including MLPs and limited partnerships, drilling programs, and private placements. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

If your financial advisor recommended an investment in All American Oil & Gas (“AAOG”) stock, limited partnership units, or high yield (“junk”) bonds, you may be able to recover losses sustained through FINRA arbitration, in the event your broker lacked a reasonable basis for the recommendation, or if your financial advisor failed to disclose the many risks associated with an investment in AAOG. Headquartered in San Antonio, TX, AAOG is a privately held oil and gas producer that is the parent company of subsidiaries Western Power & Steam, Inc. (“WPS”) and Kern River Holding Inc. (“KRH”), an upstream exploration and production outfit with approximately 124 producing wells in the Kern River Oil Field. Together, AAOG, WPS and KRH are referred to as the Company.

On November 12, 2018, the Company filed for Chapter 11 bankruptcy in U.S. District Court in the Western District of Texas, citing “an ongoing dispute with its lenders.” As of the date of filing its petition, the Company has a total of $141,942,197 in debt obligations. According to the bankruptcy petition, in a number of instances KRH is the borrower on the Company’s loan facilities, as it requires regular ongoing cash flows to maintain its exploration and production activities.

With U.S. crude oil now trading below $50 per barrel (in 2014 oil was trading around $100, and as recently as September 2018 was hovering around $80 per barrel), many oil and gas companies may now be encountering financial distress after leveraging their balance sheets in order to fund costly exploration, drilling and related operations. Predictably, this overleveraging has placed some oil and gas companies in a precarious financial position, particularly those operating in the capital-intensive and risky upstream sector of the oil and gas market.

When a broker and/or brokerage firm recommends an oil and gas investment to a client, the financial advisor should first ensure that the investor is aware from the outset of the volatile nature of an oil and gas investment; essentially, such an investment amounts to a commodity play attached to the price movement of oil. Further, the financial advisor has a duty to determine if the investment is suitable in light of the investor’s profile and stated investment objectives. In addition, in instances where an investor’s account becomes over-concentrated in oil and gas investments, or if a broker fails to disclose the risks associated with such an investment or investment strategy, the broker and his or her firm may well be held liable for losses on the investment.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in disputes concerning oil and gas investments, including MLPs, drilling programs, and private placements. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

As recently reported, both the SEC and FINRA have commenced their own investigations into GPB Capital Holdings, LLC (“GPB”). GPB is a New York-based alternative asset management firm whose business model is predicated on “acquiring income-producing private companies” across a number of industries including automotive, waste management, and middle market lending. These investigations by federal regulators come on the heels of Massachusetts securities regulators announcing in September 2018 their own investigation into GPB, as well as the sales practices of more than 60 independent broker-dealers who reportedly offered private placement investments in various GPB funds to their clientele.

GPB has raised approximately $1.8 billion in investor funds across its various private placement offerings, including GPB Automotive Portfolio, LP, and GPB Waste Management, LP. Private placement investments are complex and fraught with risk. To begin, private placements are often sold under a high fee and commission structure. Reportedly, one brokerage executive has indicated that the sales loads for GPB private placements were 12%, including a 10% commission to the broker and his or her broker-dealer, as well as a 2% fee for offering and organization costs. Such high fees and expenses act as an immediate drag on investment performance.

Further, private placement investments carry a high degree of risk due to their nature as unregistered securities offerings. Unlike stocks that are publicly registered, and therefore, must meet stringent registration and reporting requirement as set forth by the SEC, private placements do not have the same regulatory oversight. Accordingly, private placements are typically sold through what is known as a “Reg D” offering. Unfortunately, investing through a Reg D offering is risky because investors are usually provided with very little in the way of information. For example, private placement investors may be presented with unaudited financials or overly optimistic growth forecasts, or in some instances, with a due diligence report that was prepared by a third-party firm hired by the sponsor of the investment itself.

Broker-dealers are required by law to conduct due diligence on an investment before it is recommended to a client. Furthermore, financial advisors have a duty to disclose the risks associated with a financial product, as well as to conduct a suitability analysis to determine if such an investment meets an investor’s stated investment objectives and risk profile.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex investment products, including illiquid private placements and unregistered securities offerings. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

On November 9, 2018, GPB Capital Holdings, LLC (“GPB”) notified certain broker-dealers who had been selling investments in its various funds that GPB’s auditor, Crowe LLP, elected to resign. As reported, GPB’s CEO, David Gentile, stated that the resignation purportedly came about “[d]ue to perceived risks that Crowe determined fell outside of their internal risk tolerance parameters.” GPB has since engaged EisnerAmper LLP to provide it with audit services moving forward.

As we recently discussed, GPB has come under considerable scrutiny of late. In August 2018, the sponsor of various private placement investment offerings including GPB Automotive Portfolio and GPB Holdings II, announced that it was not accepting any new investor capital, and furthermore, was suspending any redemptions of investor funds. This announcement followed GPB’s April 2018 failure to produce audited financial statements for its two largest aforementioned funds. By September 2018, securities regulators in Massachusetts disclosed that they had commenced an investigation into the sales practices of some 63 independent broker-dealers who have reportedly offered private placement investments in various GPB funds. To name a few, these broker-dealers include: HighTower Securities, Advisor Group’s four independent broker-dealers – FSC Securities, SagePoint Financial Services, Woodbury Financial Services, and Royal Alliance Associates, in addition to Ladenburg Thalmann’s Triad Advisors.

The various GPB private placement offerings include:

• GPB Automotive Portfolio, LP
• GPB Cold Storage LP
• GPB Holdings, LP
• GPB Holdings II, LP
• GPB Holdings III, LP
• GPB Holdings Qualified, LP
• GPB NYC Development, LP
• GPB Waste Management, LP (f/k/a GPB Waste Management Fund, LP)

As private placement investments, the various GPB funds are very complex and risky investments, and therefore, are typically not suitable for the average, retail investor. Unfortunately, due to the high commission and fee structure associated with the various GPB funds, instances may have arisen where an unscrupulous financial advisor failed to fully inform his or her client of the many risks associated with such a private placement investment. According to certain SEC filings, sales of GPB’s two largest aforementioned funds allegedly netted the broker-dealers marketing these illiquid and esoteric products some $100 million in commissions, at a rate of about 8%, since 2013.

In addition to hefty fees, committing capital to a private placement investment carries with it substantial risks. Private placements are illiquid investments, and as such, investors may not readily sell out of their investment (often for a period of many years). Furthermore, private placements, typically offered pursuant to Regulation D, as promulgated by the SEC, are not required to provide investors with the same depth of information and disclosures as is required with publicly traded securities. Because of their risky and complex nature, private placement investments are most usually only available to accredited and/or sophisticated investors. As defined by the SEC, an investor is considered “accredited” if he or she has an annual income of over $200,000 or has a net worth of more than $1 million of assets (excluding one’s primary residence). It is a financial advisor’s responsibility to ensure that an investor meets this test.

Financial advisors, and by extension their brokerage firm, have an affirmative obligation to perform adequate due diligence on any investment recommended to customers, including private placement offerings pursuant to Reg D. Furthermore, financial advisors have a duty to disclose the risks associated with such an investment, as well as conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex investment products, including illiquid private placements and unregistered securities offerings. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

Despite FS Investment Corporation II’s (“FSIC II”, or the “Company”) providing an estimated value of $8.31 a share, recent publicly-available information concerning pricing suggests a lower value, with secondary market transactions reportedly at prices of between $7.20 and $7.31 a share and a third-party tender offer being completed at $5.15 a share.

FSIC II is a publicly registered, non-traded business development company (“BDC”) that may have been marketed to some public investors as a relatively safe investment offering a steady yield of income. However, as a non-traded BDC, the Company carries with it considerable risks. Accordingly, in those instances where retail investors were solicited by a financial advisor to invest in FSIC II without first being fully informed of the risks associated with the investment, including the potential for principal losses, high upfront fees and commissions, and the illiquid market in the Company’s shares, investors seeking to recoup their losses may have legal claims against stockbrokers or investment advisory firms who sold them the shares.

Organized under Maryland law in July 2011, FSIC II commenced its operations on June 18, 2012 and is structured as a publicly registered, non-traded BDC under the Investment Company Act of 1940 (’40 Act). Publicly-available information suggests numerous retail investors participated in FSIC II’s initial offering, priced at approximately $10 per share. FSIC II is managed by FS Investments (formerly known as Franklin Square), a Philadelphia-based alternative asset management firm sponsoring a number of non-traded BDCs. As of June 30, 2018, FSIC II reported assets under management of approximately $4.77 billion.

As a BDC, FSIC II specializes in providing financing solutions to middle market private companies. Specifically, as set forth in certain SEC filings, the Company’s business model is aimed at making “debt investments in a broad array of private U.S. companies” with annual revenues of “$50 million to $2.5 billion at the time of investment.” By investing in smaller, private companies, BDCs like FSIC II can theoretically offer investors superior returns. However, such private-equity style investing is not without risk. These risks include reduced access to capital markets by the portfolio companies in which the BDC holds investments, as well as less transparency and information in these portfolio companies than is typically provided by publicly traded companies.

Furthermore, as a non-traded investment vehicle, FSIC II is illiquid and shares cannot be readily sold on a national securities exchange. Thus, investors seeking liquidity are restricted in their options. One option available to investors is to sell their shares back to the Company, although FSIC II’s Share Repurchase Program is only available on a quarterly basis, and further, redemptions are limited as to the number of shares the Company will redeem at a given time (based on an internal formula).

Because there is not an established, liquid public market in FSIC II’s shares, investors seeking immediate liquidity may elect to participate in a tender offer by an institutional, third-party investor. Alternatively, investors may seek to sell their shares on a limited and fragmented secondary market. Unfortunately, in either scenario, investors may learn the share pricing through a tender offer or by selling on a secondary platform is often disadvantageous, with shares selling at a substantial discount to FSIC II’s stated net asset value (NAV).

Through an SEC filing on August 20, 2018, MacKenzie Capital Management (“MacKenzie”) disclosed its purchase of a total of 47,474 shares pursuant to a tender offer, priced at $5.15 per share. Based on FSIC II’s approximate $10 offering price, investors who participated in this tender offer appear to have sustained significant principal losses approaching 50% (excluding distributions). Additionally, recent secondary market pricing suggests FSIC II investors seeking near-term liquidity may have sold at prices ranging from $7.20-$7.31 per share – substantially below FSIC II’s most recent stated NAV of $8.31 per share.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded BDCs and REITs. Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

Recent pricing on shares of Cole Credit Property Trust V, Inc. (“CCPT V” or, the “Company”) – at reported prices of $17.25-$17.75 – suggests that investors who chose to sell their shares on a limited secondary market may have sustained considerable losses of up to 30% (excluding any distributions received to date). Formed in December 2012, CCPT V is structured as a Maryland corporation. As a publicly registered, non-traded real estate investment trust (“REIT”), CCPT V is focused on the business of acquiring and operating “a diversified portfolio of retail and other income-producing commercial properties.” As of October 31, 2018, the Company’s real estate portfolio consisted of 141 properties across 33 states, with portfolio tenants spanning some 26 industry sectors.

The shares of CCPT V, a publicly registered, non-traded REIT, were offered to retail investors in connection with CCPT V’s initial offering, which was priced at $25 per share. The Company launched its initial offer in March 2014, and as of the second quarter of 2018, had raised $434 million in investor equity through the issuance of common stock.

Some retail investors may have been steered into an investment in CCPT V by a financial advisor, without first being fully informed of the risks associated with investing in non-traded REITs. For example, one initial risk that is often overlooked concerns a non-traded REIT’s characteristic structure as a blind pool. In the case of CCPT V, its blind pool offering means that not only were shares issued to public investors for a REIT lacking any previous operating history, but moreover, CCPT V did not immediately identify any of the properties that it intended to purchase.

Aside from their typical blind pool structure, non-traded REITs also tend to charge investors high upfront fees and commissions (up to 15% in some instances). With regard to CCPT V, investors were charged selling commissions and a dealer manager fee of 9%, 2% for organization and offering expenses, as well as certain acquisition and development fees. In total, investors in the Company were charged 13.7% of their initial investment in commissions and fees. Unsurprisingly, such high fees act as an immediate drag on future investment performance.

Likely the greatest risk associated with non-traded REITs is their illiquid nature. Unlike publicly traded REITs, which trade on national securities exchanges at publicly quoted prices, investors in non-traded REITs such as CCPT V have limited options at their disposal when it comes to selling shares. While many non-traded REITs do have redemption programs, these share repurchase programs are typically restricted in nature, both as to timing (often, investors can only redeem their shares on a quarterly basis), as well as to amount (sponsors often curtail the number of shares available for redemption at a given time).

Non-traded REIT investors seeking immediate liquidity may elect to sell on a limited secondary market platform. In the case of CCPT V, shares have recently traded on such a secondary market at a considerable discount of approximately 30% less than the Company’s $25 per share offering price, or around $17.50 per share. Thus, investors who require immediate liquidity through a secondary platform may incur substantial losses in order to sell their shares.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded REITs and business development companies (BDCs). Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

Headquartered in Newport Beach, CA, KBS Real Estate Investment Trust II, Inc. (“KBS II”) was formed as a Maryland REIT in July 2007. Pursuant to its public offering, KBS II offered 280 million shares of common stock, of which 200 million shares were registered in its primary offering, and an additional 80 million common shares were registered under the non-traded REIT’s dividend reinvestment plan. KBS II’s initial offering closed on December 31, 2010, with 182,681,633 shares sold, thus raising gross offering proceeds of $1.8 billion.

Many KBS II investors may have been steered into this complex investment by a financial advisor or stockbroker. Unfortunately, KBS II investors may have been uninformed as to the illiquid nature of their investment (as a non-traded REIT, KBS II shares do not trade on a national securities exchange), and now have limited options if they seek liquidity on their investment.

In January 2016, KBS II’s board of directors formed a Special Committee for the purpose of exploring “the availability of strategic alternatives.” Subsequently, the Special Committee determined that it was in the best interest of KBS II stockholders to market some of the non-traded REIT’s assets, and depending on the scope of the asset sales, “thereafter adopt a plan of liquidation that would involve the sale” of remaining KBS II assets.

While KBS II has partially pared down its portfolio of real estate assets in the past 12 months, the non-traded REIT has yet to realize any liquidity event. Indeed, pursuant to its charter, KBS II was required to seek stockholder approval for liquidation in the event that its common shares had not listed on a national securities exchange by March 31, 2018. However, on March 7, 2018, KBS II’s conflicts committee unanimously determined to postpone the approval on any liquidation while the Special Committee continues to explore strategic alternatives.

Unfortunately, for shareholders seeking to exit their KBS II investment position, liquidity options are very limited and disadvantageous. To begin, KBS II has suspended its share redemption program, only allowing for redemption of shares in certain instances, including “upon a stockholder’s death, ‘disqualifying disability’ or ‘determination of incompetence’” (as defined in the share redemption program document).

Furthermore, shareholders may seek immediate liquidity on a limited and fragmented secondary market. Recent secondary market pricing for KBS II shares suggests that investors seeking to sell now may only receive $4.00 – $4.08 per share, thus incurring substantial losses in excess of 50% on their initial investment at $10 per share through the offering, excluding any distributions.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded REITs and business development companies (BDCs). Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

As recently reported, the Massachusetts Securities Division (the “Division”) has commenced an investigation into the sales practices of some 63 independent broker-dealers who offered private placements sponsored by alternative asset manager GPB Capital Holdings, LLC (“GPB”). Specifically, the Division has intimated that it began an investigation into GPB following a recent tip concerning the firm’s sales practices which allegedly occurred not long after GPB announced that it was temporarily halting any new capital raising efforts, as well as suspending any redemptions.

According to the Division’s head, Mr. William Galvin, the investigation is in its “very nascent stages.” At this time, Massachusetts securities regulators have requested information about GPB from more than 60 broker-dealers, including HighTower Securities, Advisor Group’s four independent broker-dealers, as well as Ladenburg Thalmann’s Triad Advisors.

In August 2018, GPB – the sponsor of certain limited partnership offerings including GPB Automotive Portfolio and GPB Holdings II – announced that it was not accepting any new capital. According to filings with the SEC, sales of the two aforementioned GPB private placements allegedly netted the broker-dealers marketing these investment products some $100 million in commissions, at a rate of about 8%, since 2013.

As recently reported in the Wall Street Journal (WSJ), investments in so-called private placements have experienced a substantial upswing in the wake of the 2008 financial crisis: “In 2017 alone, private placements using brokers totaled at least $710 billion … a nearly threefold increase rise from 2009.” Further, the article indicates that financial advisors recommending private placements are “six times as likely as the average broker to report at least one regulatory action against them…” and, moreover, that 1 in 8 brokers recommending private placement investments have “three or more red flags on their records, such as investor complaint, regulatory action, criminal charge or firing… .”

As a general rule, investing in a private placement carries with it considerable complexity and risk, including hefty commissions, lack of transparency, as well as the illiquid nature of the unregistered offering. Accordingly, such private placement investments are typically only available to accredited and/or sophisticated investors. An investor is considered “accredited” if he or she has an annual income of over $200,000 or has a net worth of more than $1 million of assets (excluding one’s primary residence). It is a financial advisor’s responsibility to ensure that an investor meets this test.

Financial advisors, and by extension their brokerage firm, have a duty to perform adequate due diligence on any investment recommended to customers, including private placement offerings pursuant to Regulation D, as promulgated by the SEC. Furthermore, financial advisors have a duty to disclose the risks associated with such an investment, as well as conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and associated risk profile.

Investors who wish to discuss a possible claim concerning an investment in a GPB offering or another private placement may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

As recently reported, third party real estate investment firms Everest REIT Investors I LLC and Everest REIT Investors III LLC, two private affiliated entities, commenced an unsolicited tender offer to purchase approximately 8.8 million shares of CNL Healthcare Properties, Inc. (“CNL Healthcare”) common stock for $7.50 each. Unless amended, this unsolicited tender offer will expire on August 31, 2018. As of December 31, 2017, CNL Healthcare reported a net asset value (NAV) of $10.32 per share. Thus, the recent tender offer pricing represents an approximate 27% discount on CNL’s recent NAV pricing and suggests that investors may have incurred principal losses on their investments.

Headquartered in Orlando, FL, CNL Healthcare is a Maryland REIT incorporated in June 2010 for the purpose of acquiring a portfolio of geographically diverse healthcare real estate real estate-related assets, including certain senior housing communities, medical office buildings, and acute care hospitals.

Investors in CNL Healthcare may have claims to bring in FINRA arbitration, if the investment was recommended by a broker or financial advisor who lacked a reasonable basis for the recommendation, or if the financial advisor misrepresented the nature of the investment, including its risk components.

Non-traded REITs like CNL Healthcare pose many risks that are often not readily apparent to retail investors, or adequately explained by the financial advisors who recommend these complex investments. To begin, one significant risk associated with non-traded REITs has to do with their high up-front commissions and fees, as high as 7-10% in some instances. In addition to high commissions, non-traded REITs generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%. Such high commissions and fees act as an immediate “drag” on investment performance.

Furthermore, non-traded REITs are generally illiquid investments. Unlike stocks and mutual funds, non-traded REITs do not trade on a deep and liquid national securities exchange. Therefore, many investors come to find out too late that their ability to exit their investment position is severely limited. Typically, investors in non-traded REITs can only exit their investment through redemption directly with the sponsor, and then on a limited basis, and often at a disadvantageous price. Or, investors may be able to sell shares through a limited and fragmented secondary market. Finally, investors may be presented with limited market-driven opportunities — such as a tender offer — to sell their shares.

Investors with losses in CNL Healthcare or other non-traded REITs may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

On May 30, 2018, the Securities and Exchange Commission (“SEC”) filed a civil complaint against Mr. Steven Pagartanis, alleging that the East Setauket, NY stockbroker purportedly “[d]efrauded at least nine retail investors of approximately $8 million by soliciting and selling them securities using false and misleading statements from 2013 to at least February 2018 (the ‘Relevant Period’).” During the Relevant Period, Mr. Pagartanis was affiliated with Cadaret, Grant & Co., Inc. (“Cadaret”) (CRD# 10641) from 2012 – 2017 and, thereafter, with Lombard Securities Incorporated (CRD# 27954) (“Lombard”).

As alleged by the SEC in its Complaint filed in federal court in the Eastern District of New York (SEC v Pagartanis Complaint), Mr. Pagartanis purportedly solicited certain of his customers — many of them retirees who relied upon his advice and investment recommendations — to invest in what was touted as a safe and conservative investment “[w]ith a fixed percentage return, generally between 4.5 and 8 percent annually.” Specifically, the SEC alleged that Mr. Pagartanis informed at least five investors that they were investing in the common stock of Genesis Land Development Co. (“GDC”), a Canadian real estate firm listed on the Toronto Stock Exchange. According to the SEC’s Complaint, in actuality the investment capital raised by Mr. Pagartanis was allegedly funneled to an LLC sharing the name Genesis, for which Pagartanis was the sole member and owner of the LLC.

The SEC has alleged that Mr. Pagartanis conducted a fraudulent scheme, under which he purportedly “[t]ransferred the money raised to his personal bank account, to other entities he controlled, and used around $1.8 million to make monthly interest payments to his customers.” In typical Ponzi-like fashion, the scheme reportedly collapsed in early 2018 when Mr. Pagartanis failed to pay investors their monthly interest payments.

Mr. Pagartanis’ career in the securities industry began in 1989. Since that time, he has been affiliated with numerous broker-dealers as a registered representative. Most recently, Mr. Pagartanis was associated with Cadaret from 2012 – 2017, and thereafter, Lombard. According to publicly available information through FINRA BrokerCheck, Mr. Pagartanis was discharged from his employment with Lombard following an “internal investigation” pursuant to which he purportedly “failed to respond to customer complaint questions and requests for information.”

Brokerage firms Cadaret and Lombard have a duty to ensure that their registered representatives are adequately supervised, a duty which includes monitoring their brokers in connection with outside business activities and/or sales of investments in so-called private placements. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

At Law Office of Christopher J. Gray, P.C., we have successfully resolved a number of disputes on behalf of investors, including losses sustained due to instances of fraudulent conduct such as Ponzi schemes, and related broker misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

Based upon recent secondary market pricing, investors in certain publicly registered, non-traded business development companies (“BDCs”), may have suffered losses on their illiquid investments. In the wake of the 2008 financial crisis, many retail investors have been steered into so-called non-conventional investments (“NCIs”), including non-traded REITs and BDCs, often premised upon a sales pitch or marketing presentation from a financial advisor touting the investment’s lack of correlation to stock market volatility and enhanced income via hefty distributions. Unfortunately, in some instances, investors were solicited to invest in such NCIs without first being fully informed of the risk components embedded in these products.

In January 2017, FINRA issued the following guidance with respect to investments in non-traded NCIs:

“While these products can be appropriate for some customers, certain non-traded REITs and unlisted BDCs, for example, may have high commissions and fees, be illiquid, have distributions that may include return of principal, have limited operating history, or present material credit risk arising from unrated or below investment grade products. Given these concerns, firms should make sure that they perform and supervise customer specific suitability determinations. More generally, firms should carefully evaluate their supervisory programs in light of the products they offer, the specific features of those products and the investors they serve.”

Because of the illiquid nature of non-traded NCIs, investors seeking to exit their investment position are constrained by limited options, including redemption of some or all of their shares directly with the sponsor (often at a disadvantageous price and only in an amount approved by the sponsor), as well as selling their investment in a fragmented and inefficient secondary market, typically at a disadvantageous price.

According to recent secondary market pricing, shares of FS Energy & Power Fund (FSEP), a non-traded BDC sponsored by Franklin Square, were recently listed for sale at $5.70 per share. This recent pricing in FSEP suggests that investors in this non-traded BDC may well have suffered considerable investment losses of approximately 40% on their initial investment (which does not include distributions paid to date). With respect to another non-traded BDC, Business Development Corporation of America (“BDCA”), recent secondary market pricing indicates BDCA shares were recently sold at $6.50 per share. BDCA’s shares were offered through its IPO at $11.15 per share; thus, it appears investors seeking liquidity through recent secondary market transactions have sustained losses on their BDCA investment of approximately 40% (excluding distributions and commissions paid to date).

Investors in FSEP or BDCA (or other non-traded BDCs) may be able to recover investment losses in FINRA arbitration if their investment was the subject of an unsuitable recommendation by a stockbroker or investment advisor. Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

On May 1, 2018, FINRA Department of Enforcement entered into a settlement via Acceptance, Waiver and Consent (“AWC”) with Respondent Laidlaw & Company (UK) LTD. (“Laidlaw”) (BD# 119037). Without admitting or denying any wrongdoing — Laidlaw consented to a public censure by FINRA, the imposition of a $25,000 fine, as well as agreeing to furnish FINRA with a written certification that Laidlaw’s “[s]ystems, policies and procedures with respect to each of the areas and activities cited in this AWC are reasonably designed to achieve compliance with applicable securities laws, regulations and rules.”

In connection with its investigation surrounding the matter, FINRA Enforcement alleged that “From April 2013 through December 2015… Laidlaw failed to establish and maintain a supervisory system and written supervisory procedures (“WSPs”) reasonably designed to ensure that” Laidlaw registered “representatives’ recommendations of leveraged and inverse exchange traded funds (“Non-Traditional ETFs”) complied with applicable securities laws and NASD and FINRA Rules.”

Non-Traditional ETFs are extremely complicated and risky financial products. Non-Traditional ETFs are designed to return a multiple of an underlying benchmark or index (or both) over the course of one trading session (typically, a single day). Therefore, because of their design, Non-Traditional ETFs are not intended to be held for more than a single trading session, as enunciated by FINRA through previous regulatory guidance:

“[t]he performance of Non-Traditional ETFs over periods of time longer than a single trading session ‘can differ significantly from the performance… of their underlying index or benchmark during the same period of time.” FINRA Regulatory Notice 09-31.

Further, because of the inherent complexities and risks embedded in Non-Traditional ETFs, FINRA has explicitly advised broker-dealers and their registered representatives that Non-Traditional ETFs “[a]re typically not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.” Id.

Pursuant to the AWC, FINRA’s findings of fact allege that Laidlaw registered representatives solicited and effected 869 purchases and 946 sales of Non-Traditional ETFs across 312 customer accounts, totaling in excess of $32,000,000 in transactions. Despite this volume of business in Non-Traditional ETFs, FINRA determined that Laidlaw’s own compliance systems, including its WSPs, “[d]id not require supervisors to review open positions in Non-Traditional ETFs held for extended periods or resulting in unrealized losses and did not impose product-specific limitations on Firm representatives’ ability to recommend trading in or holding Non-Traditional ETFs.” Due to these alleged infractions, FINRA Enforcement alleged that Laidlaw’s insufficient supervisory system gave rise to violations of FINRA Rules 3110 and 2010.

Moreover, brokerage firms like Laidlaw have a duty under NASD Rule 2310 and FINRA Rule 2111 — the so-called suitability rule — to, among other things, perform reasonable diligence to understand the nature of the recommended security. This due diligence “[w]ith respect to leveraged and inverse ETFs… means that a firm must understand the terms and features of the funds, including how they are designed to perform, how they achieve that objective, and the impact that market volatility, the ETFs use of leverage, and the customer’s intended holding period will have on their performance.” See FINRA Regulatory Notice 09-31 and FINRA Regulatory Notice 12-03.

Attorneys at Law Office of Christopher J. Gray, P.C. have substantial experience representing customers in FINRA arbitration cases involving claims against stockbrokers or investment advisors. Investors with questions concerning possible claims involving Non-Traditional ETFs or other non-conventional investments may contact our office at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

Former financial advisor Scott William Palmer (CRD# 817586), who was most recently affiliated with Janney Montgomery Scott LLC (“Janney”) (BD# 463), has voluntarily consented to a bar from the securities industry pursuant to a Letter of Acceptance, Waiver & Consent (“AWC”) accepted by FINRA Enforcement on April 10, 2018. Without admitting or denying any wrongdoing, the Hackensack, NJ-based former broker consented to the industry bar following his June 13, 2017 termination from employment by Janney.

Mr. Palmer’s career in the securities industry dates back to 1973, and included stints at now defunct Darby & Co., Dean Witter, Citigroup, and — most recently, Janney — from 2007-2017. In June 2017, Janney permitted Mr. Palmer to resign; according to publicly available information and as disclosed on Mr. Palmer’s Form U-5, his discharge from employment was due to Janney’s “Loss of confidence related to complaint disclosure history.”

FINRA records indicate that Mr. Palmer has been subject to twelve customer disputes, including one case in which relief was denied, and another case that settled in July 2016 for $75,000 alleging that Mr. Palmer had made unsuitable investments in the customer’s account. According to FINRA BrokerCheck, of the ten customer complaints pending arbitration, a number of them allege that Mr. Palmer purportedly recommended unsuitable investments in certain energy stocks, and further, overconcentrated certain customers in energy sector investments.

Pursuant to the AWC, FINRA Enforcement alleged it was carrying out an investigation surrounding potential suitability violations concerning Mr. Palmer. Moreover, FINRA sent a request on February 2, 2018 to Mr. Palmer, for his appearance for on-the-record testimony pursuant to FINRA Rule 8210. While Mr. Palmer purportedly acknowledged the request for testimony, according to FINRA he failed to appear.

When recommending an oil and gas investment to a customer, a brokerage firm — and by extension the broker — has a duty to first conduct due diligence on the investment. In addition, an oil and gas investment is unique and carries certain risks associated with the volatile nature of the underlying commodity. Further, the financial advisor recommending such an investment has a duty to determine if the investment is suitable pursuant to Rule 2111 in light of the investor’s profile and stated investment objectives. In instances where an investor’s account becomes over-concentrated in oil and gas investments, or a broker fails to disclose the risks associated with such an investment or investment strategy, the broker and his or her firm may well be liable for losses on the investment.

The attorneys at Law Office of Christopher J. Gray, P.C. have experience in representing investors in oil and gas investments, including investors in futures and options, oil and gas private placements, drilling funds, and other energy-related investment products. Investors may contact a securities arbitration lawyer at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

On March 27, 2018, the Securities and Exchange Commission (“SEC”) announced formal charges against Wedbush Securities Inc. (“Wedbush”, CRD# 877) with respect to allegations that the broker-dealer failed to supervise its employee, Ms. Timary Delorme (f/k/a Timary Koller) (“Delorme”). Based on its investigation, the SEC alleged Wedbush ignored numerous red flags indicating that Ms. Delorme — who has been affiliated with Wedbush as a registered representative since 1981 — was purportedly involved in a manipulative penny stock trading scheme with Izak Zirk Englebrecht, a/k/a Zirk De Maison “(“Englebrecht”).

As alleged by the SEC, Mr. Englebrecht engaged in manipulative trading, commonly referred to as “pump and dumps”, through the use of various thinly traded microcap penny stocks. According to the SEC’s allegations, Ms. Delorme purchased stocks at Englebrecht’s behest in certain customer accounts, and in turn received undisclosed material benefits. Moreover, the SEC’s findings suggest that Wedbush ignored numerous red flags associated with Ms. Delorme’s alleged involvement in the scheme, including a customer email outlining her involvement, as well as several FINRA arbitrations regarding her penny stock trading activity.

In response to the red flags, Wedbush purportedly conducted two investigations into Ms. Delorme’s conduct. The SEC has characterized Wedbush’s investigation as “flawed and insufficient”, and that ultimately the brokerage firm failed to take appropriate action to address the alleged misconduct. The SEC’s order instituting administrative proceedings against Wedbush charges that the broker-dealer failed to reasonably supervise its broker, Ms. Delorme. The matter will come before an administrative law judge, who will hear the case and prepare an initial decision — there have not yet been any findings of misconduct.

Founded in 1955, Los Angeles based Wedbush formed its brokerage unit in July 1966. As of June 2017, Wedbush’s Wealth Management Group provides various wealth management services through approximately 400 financial advisors located in roughly 100 offices nationwide. Brokerage firms like Wedbush have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

Both the SEC and FINRA have issued ample guidance concerning trading in penny stocks, which is generally regarded as a risky proposition due to a host of factors, including the lack of transparency as to information about the investment, including financials. In addition, penny stocks, due in part to their characteristic low-price and low-volume, are particularly susceptible to fraudulent activity such as pump and dump schemes by unscrupulous stock manipulators.

Attorneys at Law Office of Christopher J. Gray, P.C. have handled a number of disputes on behalf of investors, including losses sustained due to instances of alleged fraudulent conduct and market manipulation. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

Former 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.

NASD Rule 2510(b) states that a registered representative may not exercise discretion in a customer’s account “unless such customer has given prior written authorization,” and moreover, such discretionary authority has been approved in writing by the advisor’s employer firm. Publicly available information through FINRA BrokerCheck indicates that Mr. Meier has been subject to fourteen customer complaints, all of which have resulted in settlement.

Brokerage firms like Morgan Stanley have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

Attorneys at Law Office of Christopher J. Gray, P.C. have represented investors in a number of cases involving unsuitable investments and investment strategies, excessive trading or churning, and alleged broker misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

Financial 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.

After BP opened his accounts at Vanderbilt, FINRA Enforcement further alleged that over the ensuing months and years, Mr. Kaplan “exercised de facto control over BP’s accounts” and that the elderly investor “[r]elied on Kaplan to direct investment decisions” while simultaneously “[e]xperiencing a decline in his mental health.” FINRA has further alleged that during this March 2011-2015 time frame, Mr. Kaplan “[e]ffected more than 3,500 transactions” in BP’s accounts, which “[r]esulted in approximately $723,000 in trading losses and generated $735,000 in commissions and markups for Kaplan and [Vanderbilt].”

Excessive trading, or churning, occurs where: (i) a registered representative exercises control over a customer’s account; and (ii) the level of activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. Excessive trading constitutes a violation of FINRA’s suitability standards set forth under FINRA Rule 2111.

Brokerage firms like Vanderbilt have a duty to ensure that their registered representatives are adequately supervised. Brokerage firms must also take reasonable steps to ensure that their financial advisors follow all applicable securities rules and regulations, in addition to internal policies and procedures. In instances when brokerage firms fail to adequately supervise their registered representatives, they may be held liable for losses sustained by investors.

At Law Office of Christopher J. Gray, P.C., our securities attorneys have significant experience representing investors in cases involving excessive trading or churning, and related broker misconduct. Investors may contact a securities arbitration attorney by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

As 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.

As we have discussed in several recent blog posts, a put option is a contract that allows the purchaser of the underlying contract to sell a security at a specified price (the strike price). As a general proposition, this allows the purchaser to hedge a position or a portfolio, by essentially creating a price floor, such that a drop in a security price below a certain level will deliver a profit on the option contract.

On the other hand, when an investor — or financial advisor recommends selling a put option — the seller is betting that the price will stay higher than the option price. Moreover, in instances when the seller of the option contract does not own the underlying security, then the seller is engaged in naked option writing. This is an extremely risky strategy that is likely not suitable for the average, retail investor.

Mr. Stimpson was most recently affiliated with Allegis (2014 – 2017), and previous to that, he was affiliated with Signator Financial Services, Inc. (CRD#19061) (2010-2014). Further, BrokerCheck indicates that Mr. Stimpson has been involved in a total of eight customer disputes.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors in cases involving non-traditional investment products, including managed futures, leveraged and/or inverse funds, as well as option contracts and option strategies. Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

As 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.”

Allegations of selling away typically also entail allegations that a broker has engaged in undisclosed outside business activities, in violation of NASD Rule 3030 and FINRA Rule 3270. The industry rules governing outside business activities mandate, among other things, that a broker must obtain written approval from their firm prior to selling any security product.

In instances where a financial advisor engages in certain outside business activities that include selling away from the firm, the brokerage firm itself may be held liable for losses sustained by investors. This is because brokerage firms, as members of FINRA, have a duty to monitor the activities of their registered representatives, a duty which includes ensuring that a robust compliance program is in place, in order to effectively monitor the sales activities of its registered representatives.

Typically, selling away scenarios involve investments in closely held business ventures, limited partnerships, various real estate investments, promissory notes, and in some instances – penny stocks. Investors who believe that they may have a claim for “selling away” violations by a stockbroker or financial advisor may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

Real 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.

According to publicly available information, investors in MVP I acquired common stock at a price of $9 per share, whereas MVP II’s original offering price was $25 per share. Further, publicly available data concerning the recent merger indicates that MVP I shareholders received 0.365 shares of MVP II common stock for each MVP I share owned.

Unfortunately, shareholders in The Parking REIT who require liquidity have few options at their disposal. For example, as disclosed by MacKenzie through its tender offer, “While management intends to list The Parking REIT’s shares for trading on a national securities exchange, there can be no guarantee that such a listing will occur at all, or in a timely manner.” Moreover, as of September 30, 2017, there appears to be no shares eligible for redemption with the sponsor, unless in the event of a death or disability of the shareholder.

Investors in The Parking REIT may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (“FINRA”), if their investment in The Parking REIT was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the financial advisor. Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

Investors in the LJM Preservation and Growth Fund suffered substantial losses in early February, 2018 as volatility in broad stock market indices spiked. LJM Preservation and Growth Fund (“LJM P&G Fund” or the “Fund”) (LJMAX, LJMCX, LJMIX) is a mutual fund advised by LJM Funds Management, Ltd., (“LJM”). LJM is headquartered in Chicago, IL, and was founded in 2012, as an affiliate of LJM Partners, an investment management firm that has been managing alternative investment strategies since 1998.

Since its inception in 2013, the LJM P&G Fund has employed an investment strategy that “seeks capital appreciation and capital preservation with low correlation to the broader U.S. equity market. The Fund attempts to profit, primarily, from the volatility premium – the spread between implied volatility (investors’ forecast of market volatility reflected in options pricing) and realized (actual) volatility. The Fund aims to capture this premium by writing (selling) call and put options on S&P 500 Index futures.”

A put option is a contract that allows the purchaser of the underlying contract to sell a security at a specified price (the strike price). This allows the purchaser to hedge a position or a portfolio, by essentially creating a price floor, where a drop in a security price below a certain level will nevertheless deliver a profit on the option contract. Conversely — when an investor, or institutional fund manager, sells a put option — the seller is betting that the price will stay higher than the option price. And in instances when the seller of the option contract does not own the underlying security, then the seller is engaged in naked option writing. This is an inherently risky strategy fraught with risk; in fact, some market pundits have referred to selling naked puts as “picking up nickels in front of a steamroller.”

As we discussed in several recent blog posts, investing in volatility-linked products is extremely complex and risky, and therefore, not likely a suitable strategy for the average, retail investor. In the same vein, writing put options – particularly naked put options – against an index such as the S&P 500 may prove to be a recipe for disaster. In part, S&P 500 option prices are determined by market volatility.

In the case of LJM P&G Fund, disaster struck on February 5, 2018, when the Fund cratered in value, its share price dropping from $9.67 to $4.27 (a 55.8% decline). The following day, February 6, saw more hemorrhaging as the Fund suffered another sharp decline of 54.6% to close at $1.94 per share. Following the Fund’s two-day decline of 80%, Gretchen Rupp of Morningstar indicated that “It may be the biggest two-day drop for a mutual fund ever.”

An 80% decline over two trading days for LJM P&G Fund is of grave concern, particularly when the Fund is marketed as a vehicle seeking capital appreciation and preservation. It is likely that many investors who bought into the Fund may well not have understood, or been informed by their financial advisor, of the extreme risk associated with investing in such a complex and risky investment product that utilized an extremely risk naked put option strategy to generate returns.

The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have sustained losses due to the negligence or misconduct of their broker and/ brokerage firm. In particular, the firm has handled cases concerning certain non-traditional, or exotic investment products, including managed futures and leveraged and/or inverse ETFs and ETNs. Investors may contact a securities arbitration lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.