According to the claim, Paul Larsen, a financial advisor, liquidated the claimants’ mutual funds, blue chip stocks and fixed income investments. Allegedly, he told his clients he was doing this to get away from the market risk of these investments. Furthermore, he represented the replacement investments as safe and claimed they would generate income and were opportunities he offered to his “best clients.” However, the products he invested his clients’ funds in were risky, unsuitable investments including:

• KBS REIT
• Atlas America Public Fund #14
• Colorado Water Capital Group LLC
• Ridgewood Energy Fund S
• Ridgewood Energy Fund Q
• Platte Water Group I LLC/Yokam
• Puritan Capital Group LLC
• Issacher Global Management LLC
• UKAG Group LLC

According to stock fraud lawyers, Larsen was eventually fired from the investment firm but, reportedly, his clients were not notified and he was listed as the clients’ broker on their account for just under two years after he was fired. Allegedly, the clients did not find out there were any problems with Larsen until after FINRA barred him from the securities industry permanently.

Typically, non-traded REITs carry a high commission, often as high as 8-10 percent, which motivates brokers to make unsuitable recommendations to their clients. Non-traded REITs such as the KBS REIT are attractive to investors because they carry a relatively high distributions of income on a quarterly or monthly basis. According to securities fraud attorneys, however, these investments are inherently risky and illiquid, and many of them have suffered significant declines in value, resulting in investor losses.

The claim is seeking compensatory damages of over $2 million for negligence, breach of fiduciary duty and misrepresentation. If you suffered significant losses as a result of the negligence, breach of fiduciary duty, misrepresentation, or the unsuitable recommendation of non-traded REITs or other risky, illiquid products, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Typically, REITs carry a high commission which motivates brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs carry a relatively high dividend or high interest, making them attractive to retired investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors. In addition, frequent updates of the investment’s current price are not required of broker-dealers, causing misunderstandings about the financial condition of the investment. Because frequent updates are not required, investors may believe the REIT is doing much better than it actually is.

Reportedly, LPL Financial and its advisor, used an over-concentration of illiquid investments in the client’s portfolio. Furthermore, these investments carried a high level of risk because the securities recommended to the claimant didn’t trade freely. In addition to the Inland Western REIT, the portfolio also consisted of KBS REIT, Inland American REIT, LEAF Fund, Hines REIT, Atlas, ATEL Fund X, PDC 2005A, and ATEL Fund XI

As retirees, the claimants had a low risk tolerance and wanted a conservative, income-producing portfolio. Their goal of principal protection during retirement years allegedly made the recommendations they received unsuitable. Furthermore, the risk associated with these investments was misrepresented by the LPL advisor, who benefitted financially as a result of the high commission received on these investments. The claimants have stopped receiving dividends in many of the investments. In addition, investors have suffered significant REIT losses as a result of the substantial declines in the value of many of these investments.

If you suffered significant losses as a result of your investment in Inland Western, or another risky REIT investment, you may have a valid securities arbitration claim to recover your REIT losses. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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.

In March, KBS REIT I investors were notified that the investment’s value would drop from $7.32 to $5.16 per share, representing a 29 percent decline in value. The investment’s offering price was $10 per share. Furthermore, KBS also stated it would cease distributions to investors. An investor presentation filed with the SEC in March stated that KBS REIT I raised $1.7 billion in equity during its initial offering. The investment holds loans and other debt of $2.3 billion and property assets of $3.4 billion.

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. According to securities fraud attorneys, because of the high-commissions these investments generally offer, many brokers make unsuitable recommendations of REITs to investors. Based on information now known about KBS REIT, many of the firms that sold this investment will be unable to prove the adequate due diligence was performed before recommending this product to investors.

According to securities arbitration lawyers, investors should not be discouraged by the fact that the class action lawsuit against KBS has been withdrawn. Investors can still recover losses through Financial Industry Regulatory Authority arbitration.

If you have suffered significant losses as a result of your investment in the KBS REIT, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.