On November 6, 2018, Sierra Income Corporation (“Sierra”) filed a Registration Statement (on Form N-14) with the SEC, notifying Sierra investors and the public at large of a proposed merger transaction. Specifically, Sierra’s board of directors is seeking shareholder approval on a series of related transactions designed to effectuate a merger between and among Sierra, a publicly registered non-traded business development company (BDC), as well as Medley Capital Corporation (“MCC”), a publicly traded BDC, and Medley Management Inc. (“MDLY”), a publicly traded asset management firm.

MDLY is the parent company of both MCC’s and Sierra’s investment adviser, and the same portfolio management team and officers are responsible for both MCC’s and Sierra’s operations. While a date for a special shareholder meeting has yet to be set, Sierra’s board of directors is seeking shareholder approval on the contemplated merger, a transaction which will reportedly create the second largest internally managed and seventh largest publicly traded BDC.

Sierra is currently externally managed by SIC Advisors LLC, which in turn, is affiliated with MDLY. MDLY operates a national direct origination franchise through which it seeks to market its financial products, including Sierra. As of December 31, 2016, Sierra reported that it had raised in excess of $900 million in connection with its equity capital raise. As of July 31, 2018, Sierra had closed its public offering. Most recently, shares of Sierra have been assigned a NAV of $7.27 per share by management, and has reported approximately $1.1 billion in total assets.

Under the terms of the contemplated merger, MCC shareholders will receive 0.8050 shares of Sierra stock for each existing share they currently hold. Further, MDLY shareholders will receive 0.386 shares of Sierra stock for each Medley Class A share, in addition to $3.44 of additional cash compensation and a special cash dividend of $0.65 per MDLY share. Current Sierra shareholders will continue to hold their shares of Sierra stock, but in a publicly traded BDC. The contemplated merger is cross conditioned on approval by Sierra, MCC, and MDLY shareholders, regulatory review, and other customary closing conditions. It is anticipated that the transaction will close in early 2019.

Investors who participated in Sierra’s offering acquired shares at $10 per share. Moreover, as set forth in Sierra’s initial prospectus, investors who participated in the offering were subject to considerable up-front fees and commissions of nearly 10%, including a “selling commission” of 7.00%, in addition to a “dealer-manager fee” of 2.75%. While the contemplated merger has yet to garner shareholder approval, Sierra investors are cautioned to monitor the situation as it develops. In particular, MCC’s share price has dramatically underperformed broad market indices over the past 3-5 years (e.g., from a high of approx. $16 per share in March 2013, MCC currently trades at less than $4 per share), including its market cap decreasing from more than $800 million to less than $200 million as of today.

Persons who have sustained losses in Sierra (or another non-traded investment) may be able to recover damages in FINRA arbitration. Investors 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. 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).

Over the past several years, many retail investors were steered into investing in non-traded REITs such as SRT by their broker or money manager based on the investment’s income-producing potential. Unfortunately, many investors were not informed of the complexities and risks associated with non-traded REITs, including the investment’s high fees and illiquid nature. Currently, investors who wish to sell their shares of SRT may only do so through direct redemption with the issuer or by selling shares on an illiquid secondary market, such as Central Trade & Transfer.

In November 2008, SRT filed a Form S-11 with the Securities and Exchange Commission (“SEC”) in order to raise capital for its IPO. By August 2009, SRT initiated its IPO at $10 per share for up to $ 1 billion in investor capital. Unfortunately for SRT investors who purchased shares at $10, the secondary market now lists SRT shares at a deep discount. For example, Central Trade & Transfer has recently listed shares of SRT with a bid-ask spread of $4.60 – $4.50 per share.

The recent pricing in SRT suggests that investors in this non-traded REIT may well have suffered considerable investment losses of approximately 55% on their initial investment of $10.00 per share.

If you have invested in SRT, or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA 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 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

Publicly registered non-exchange traded REITs like American Finance Trust and Lightstone Value Plus REIT V are complex investment vehicles that carry substantial risk, including significant fees and lack of liquidity (often making redemption difficult for a shareholder seeking to exit an investment). Many retail investors are steered into purchasing non-traded REITs upon the recommendation of their broker or financial advisor who will typically tout the investment’s income component to their clients seeking an income stream. Unfortunately, many investors who purchase shares in non-traded REITs are not fully informed of the many complexities and risks associated with such an investment.

American Finance Trust (“AFT”) is a non-traded REIT that was formed in January 2013 and subsequently launched by American Financial Advisors, LLC. More recently, in February 2017, AFT (with $2.1 billion in assets) and American Realty Capital-Retail Centers of America (with $1.25 billion in assets) announced shareholder approval for a merger of the two non-traded REITs.

AFT was initially priced at $25 per share when it commenced its public offering in 2013. Currently, investors seeking to redeem their shares may do so through a limited secondary market. For example, Central Trade and Transfer — a secondary market for private placements and certain alternative investments — has recently listed AFT shares for $15.50 per share. Thus, AFT investors wishing to sell some or all of their position will be forced to sustain a substantial loss in order to exit their illiquid investment in AFT.

The Lightstone Value Plus REIT V (“Lightstone”) is another non-traded REIT. In July 2017, Behringer Harvard Opportunity REIT II Inc. (“Behringer II”) rebranded and changed its name to Lightstone. Many retail investors bought into Behringer II, which commenced its offering to investors in January 2008 and closed its offering in March 2012, after raising approx. $265 million in capital from investors.

Behringer II (now Lightstone) shares were initially sold to investors at $10 per share. According to Central Trade and Transfer, Lightstone shares are now listed for only $5.75 per share.

With respect to both AFT and Lightstone, many retail investors may have bought into these non-traded REITs without first being fully informed of the risks associated with these complex and illiquid investments. As members and associated persons of FINRA, brokerage firms and their financial advisors must ensure that adequate due diligence is performed on any investment that is recommended to investors. Further, firms and their brokers must ensure that investors are informed of the risks associated with an investment, and must conduct a suitability analysis to determine if an investment meets an investor’s stated investment objectives and risk profile.

If you have invested in AFT or Lightstone, or another non-traded REIT, and you have suffered losses in connection with your investment, you may be able to recover your losses in FINRA 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 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

KBS I launched through its initial public offering (“IPO”) in early 2006 for issuance of up to 200 million shares. Through its IPO at $10 per share, KBS I raised $1.7 billion prior to closing in May 2008. The company’s portfolio includes nearly 200 properties, in addition to participation in various real estate loan receivables.

KBS I has gradually written down its estimated share value over the years, but no liquidity event has yet provided a public market that would establish the true value of KBS I shares. One secondary market that provides a limited platform for investors in non-traded REITs, Central Trade & Transfer, has recently listed shares of KBS I with a bid-ask spread of $1.90 – $1.80 a share, suggesting that investors in KBS I may have suffered principal losses of as much as 80% on their initial investments of $10.00 a share.

If you have invested in KBS I, or another non-traded REIT, and you have suffered losses in connection with your investment (or are currently unable to exit your illiquid investment position without incurring considerable losses), you may be able to recover your losses in FINRA 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 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.

Specifically, the Department alleges that Thrivent violated the Act by “… replacing its clients’ existing variable annuities for new variable annuities which required the clients to pay surrender charges and various fees.” According to the Department, possible violations of law in the case include (i) failure to maintain and enforce a supervisory system with adequate written procedures to achieve compliance with applicable securities laws and regulations, (ii) failure to adequately review the sales and replacements of VA’s for suitability, (iii) failure to enforce its written procedures regarding documentation of sales and replacements of VA’s, and (iv) failure to adequately train its salespersons, registered representatives and principals.

Prior to 2012, Thrivent rolled out a new feature to its VA. This feature consisted of adding a Guaranteed Lifetime Withdrawal Benefit (“GLWB”) to the VA in return for a rider fee. During the time period of January 2011 – June 2012 and July 2013 – June 2014, Thrivent allegedly recommended that certain customers purchase new variable annuities with GLWB riders to replace existing variable annuities, without performing any analysis of whether the customers would economically benefit from the variable annuity switch. Some customers who were advised to switch allegedly would have received greater payments over the life of the policies if they had kept their original variable annuities in place.

In general, VA products have a checkered history with regulators. Both the Financial Industry Regulatory Authority (“FINRA”) and the Securities & Exchange Commission (“SEC”) have issued numerous rulings, advisory documents and investor alerts warning that the sale of VA’s might be unsuitable and inappropriate under certain circumstances. Specifically, the SEC has warned about the risks and costs of switching VA contracts, encouraging investors to consider whether they can buy the insurance features embedded in a VA less expensively as part of the VA or separately. FINRA has warned investors that switching, or exchanging, a VA contract is generally not a good idea, due to bonus recapture charges, surrender charges, higher charges accompanying the new contract, unnecessary riders on the new contract, and whether the advisor is motivated by commissions.

When a broker or financial advisor recommends that a client purchase or sell a security, the broker must have a reasonable basis for believing that the recommendation is suitable for the investor. In making this assessment, a broker must consider the investors income and net worth, investment objectives, risk tolerance, and other security holdings.

If you received an unsuitable recommendation of securities from a broker or investment adviser, including variable annuities, and suffered significant losses are a result, you may be able to recover your losses in FINRA 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 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Inland American is an enormous company- the largest of the giant non-traded REITS. The Company had raised a total of approximately $8.0 billion of gross offering proceeds as of December 31, 2008.

Inland American is a non-traded REIT, meaning that its shares are not listed on a national securities exchange. However, sales of shares in non-traded REITs, which file periodic reports with the Securities Exchange Commission as do listed companies, are not limited to accredited investors and shares are sold to the general public through brokers.

Non-traded real estate investment trusts (REITs) are highly risky products 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.

Brokers and financial advisors are required to make investment recommendations that are consistent with their clients’ risk tolerance, net worth, investment objectives and experience in the market. However, due to the high sales commissions brokers typically earn for selling REITs – as high as 15%- brokers can be tempted to make “one size fits all” recommendations to investors in order to reap commissions. Brokerage firms are required by FINRA rules to supervise brokers and investment advisors- even those who work in independent branch offices- to ensure that the brokers make only suitable recommendations.

If you have suffered significant losses as a result of unsuitable recommedations of REITs or other non-conventional investments by a stockbroker or financial advisor, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investor rights attorney at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.