Investors in the Walton Land Fund companies (“Walton”) may have FINRA arbitration claims, if their investment 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 stockbroker or advisor.
Walton has marketed a series of highly speculative private placements focused on vacant, undeveloped properties that do not generate income. The private placements are structured as limited partnerships, and include the following:
Walton U.S. Development Fund, LP
Walton U.S. Land Fund 1, LP
Walton U.S. Land Fund 2, LP
Walton U.S. Land Fund 3, LP
Walton U.S. Land Fund 4, LP
Walton U. S. Land Fund 5, LP
Walton U.S. Land Fund 6, LP
Walton U.S. Land Fund 7, LP
Walton’s stated business plan is to acquire and hold undeveloped land until it can be sold for development at a future date. But the vast majority of the company’s 345 North American land projects have reportedly passed their projected sales date. Founded in 1979, Walton and its investors profited after buying land cheaply following a deep Alberta recession in the 1980s, but has reportedly failed to successfully execute the same playbook in its subsequent funds. Investors began to worry in 2017, when certain Walton entities filed for creditor protection in Canada.
Private placement investments like Walton’s offerings are complex and fraught with risk. To begin, private placements are often sold under a high fee and commission structure. Such high fees and expenses act as an immediate drag on investment performance but may provide a powerful incentive for brokerages and advisors to sell the investments. Walton reportedly has paid sales commissions as high as 13.25% in some cases to sellers of its private placements, even though a sales commission in the range of 6% is more typical for speculative private placement investments.
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 lack regulatory oversight. Accordingly, private placements are typically sold through what is known as a “Reg D” offering. 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.
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 firstname.lastname@example.org for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, New Jersey, 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).