Category Archives: VSR Financial Services

VSR Financial Clients May Have Claim For Losses on Private Placements & Alternative Investments

Customers who purchased private placements and/or other alternative investments from VSR Financial may be able to recover damages for losses on these investments if the broker misrepresented the investments when he was selling them or if the investments are not suitable for your portfolio.

Brokers are required to “know the customer” and to make investment recommendations that are suitable, taking into account the customer’s age, health, investment experience, investment objectives and risk tolerance.

VSR Financial was recently sanctioned and assessed a fine of $550,000 in connection with the sale of alternative investments, non-conventional investments and private placements. VSR alt inv. FINRA sanction may 2013

The FINRA investigation criticized VSR for allowing customers to invest too large a percentage of their net worth in these alternative investments and for allowing brokers to provide inaccurate reports to customers and for falsification of documents used to obtain approval of the sales of these products. Because of the inaccurate pricing used by brokers and the firm’s lack of supervision, customers received statements with erroneous pricing information.

Some of the alternative investments sold by VSR Financial include:

  • Penneco Oil Company
  • Odyssey Diversified Notes IX
  • Arciterra Note Fund III
  • Mewbourne Energy Partners
  • Waveland Resource Partners
  • Waveland Energy 2011-A Drilling
  • UDF III
  • UDF Land Opportunity
  • Net REIT
  • Odyssey Diversified VI
  • Arciterra Note Fund III
  • Odyssey Diversified Notes IX
  • MPF Income Fund 22 LLC
  • Behringer Harvard Opp REIT
  • Cole Credit Property Trust II
  • DBSI 2008 Notes Corporation

In October 2010, VSR Financial broker Michael D. Shaw entered into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA and consented to a permanent bar from the industry for misrepresentations and unsuitable recommendations made in connection with the sale of private placement investments . ( AWC 2010022963601). 

Shaw was found to have misrepresented the risks associated with the sale of private placements and to have made unsuitable recommendations to customers. In addition Shaw altered internal VSR compliance documents in order to falsely qualify the customers for purchase of the subject investments. Shaw was barred from the industry.

If you purchased alternative investments, private placements and/or other non-conventional investments from VSR Financial and believe that the nature of the risk associated with the investments was misrepresented or if you feel the investments are not suitable, you may be able to recover damages through FINRA arbitration.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

Investigation of John H. Towers-VSR Financial-UPDATED JAN 2014

 JANUARY 2014 UPDATE: In January 2014, John Towers was fined $25,000 and suspended for three months by FINRA in connection with the sale of over $6 million of real estate investment trusts (REITs) and private placements to a couple that had indicated they wanted only moderate risk for their brokerage account. Official FINRA  records report that Towers was discharged by VSR Financial 12/31/2013.  See this for more details. 

Rex Securities Law, Boca Raton, FL , is investigating VSR Financial broker John H. Towers on behalf of one of his former customers whose account suffered losses in alternative investments. The subject account of our elderly client was invested in a number of alternative investments that appear unsuitable given her age, limited net worth and lack of financial sophistication.

The investments include the following:

  • Penneco Oil Company
  • Odyssey Diversified Notes IX
  • Arciterra Note Fund III, LLC
  • Mewbourne Energy Partners 10-A
  • Mewbourne Energy Partners 11-A
  • Waveland Resource Partners I
  • Waveland Energy 2011-A
  • Waveland Drilling Partners 2008A
  • UDF III
  • UDF Land Opportunity
  • NetReit

According
to FINRA records, Towers has been registered with VSR Financial
Services, Inc. since June 2002, and offices in Plano, Texas.

Real
estate investment trusts, especially those not traded on a conventional
exchange, as well as other alternative investments such as oil and gas
and other limited partnerships are generally not considered suitable for
retired conservative investors.

In May 2013, VSR
Financial Services was fined $550,000 for sales of alternative
investments that were too high a concentration level for customer
accounts, for falsifying sales documents and for providing inaccurate
and misleading reports.
See here for more information.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

VSR Financial Fined $550,000 For Sale of Alternative Investments

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms doing business in the United States. FINRA’s chief role is to protect investors by maintaining the fairness of the U.S. capital markets.

All stockbrokers and broker dealers (brokerage firms) are required to be licensed by and subject to the rules and regulations of FINRA. Each month FINRA publishes disciplinary actions against brokers and broker dealers. Discipline can range from monetary fines and suspensions, or in extreme cases, revocation of licensing and a bar from the securities industry.

See the FINRA website for current and historical disciplinary actions.

July 2013

Note: Alternative investments include non publicly traded real estate investment trusts (REITS) , hedge funds, real estate, commodities and derivatives contracts and, managed futures. It may also include art, wine, antiques, coins or stamps. These investments tend to be complex, illiquid, nontransparent, hard to value and expensive.

VSR Financial Services, Inc.  Overland Park, Kansas and Donald Joseph Beary, Registered Principal, Lenexa, Kansas) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $550,000. Beary was fined $10,000 and suspended from association with any FINRA member in any principal capacity for 45 days. Without admitting or denying the findings, the firm and Beary consented to the described sanctions and to the entry of findings that the firm failed to establish, maintain and enforce a reasonable supervisory system regarding the sale of non-conventional investments.

The findings stated that the firm’s WSPs provided that no more than 40 percent to 50 percent of a client’s exclusive net worth could be invested cumulatively in alternative investments unless there was a substantial reason to exceed the guidelines and that justification was well documented. Supplemental to these
procedures, the firm, through Beary, created additional procedures that applied a discount to certain non-conventional instruments, reducing the percentage of a customer’s liquid net worth invested. The findings also stated that as the direct participation principal, Beary had responsibility for the implementation and supervision of the discount program.

The Securities and Exchange Commission (SEC) identified as a deficiency, in a letter to the firm, that it did not have adequate written procedures relating to the discount program. The SEC made the same finding two years later regarding the lack of WSPs relating to the discount program. Despite these warnings from the SEC, Beary did not take reasonable steps to implement WSPs or to otherwise discontinue the use of the discount program.

The findings also included that in addition to the 40 percent to 50 percent concentration limit stated in the firm’s WSPs, the firm’s new account form asked each client to specify the percentage of liquid net worth that the client would be comfortable investing in various risk categories. Most alternative investment program sponsors identified their products involving, at a minimum, a high degree of risk. The firm also assigned a risk category to each alternative investment it sold. Rather than assign a risk category based upon the risk level identified by the sponsor in the alternative investment offering documents, the firm routinely assigned lower risk categories. In several instances, the firm lowered its internal risk rating subsequent to the firm’s acceptance of the product.

In spite of the firm’s efforts to increase sales of alternative investments through the use of discounts and risk rating reductions, customer investments still exceeded the 40 percent concentration guideline, but the firm did not document the existence of a substantial reason to exceed the concentration guidelines as required by its WSPs.

FINRA found that the firm failed to establish, maintain and enforce a reasonable supervisory system regarding the use of consolidated reports. The firm’s WSPs regarding consolidated statements were limited to a few memoranda issued to registered representatives prior to the issuance of FINRA Regulatory Notice 10-19. In practice, for six years, the firm’s registered representatives used a number of consolidated reporting systems. The firm did not require pre-approval of the consolidated reports to determine whether accurate pricing and disclosures were being used.

The firm did not have a system for prompt review of the consolidated reports after the reports were sent to customers. Given the fact that the firm allowed its registered representatives to enter valuations manually, the firm’s lack of supervision of the consolidated reports was unreasonable. FINRA also found that the firm, acting through a registered representative, recommended and effected the sale of high-risk private placements to customers. While these products may have been suitable for certain customers, they were not suitable for these customers given their financial circumstances and condition.

The firm earned approximately $35,950 in commissions on the transactions. The firm, through another registered representative, made recommendations to customers that were not suitable given their moderate risk tolerance and specifications, and the firm earned commissions on the transactions of approximately $483,077.38. In addition, FINRA determined that the firm failed to reasonably supervise its representatives with respect to the unsuitable transactions. One of several firm principals reviewed and approved the transactions of one of these representatives, and each of the principals failed to detect or investigate “red flags” regarding the transactions. This representative falsified the account documentation for customers, but the firm did not detect or investigate any of the representatives’ falsification of documents or other red flags. Detection and investigation of any of these red flags might have prevented the representative’s unsuitable recommendations and the resulting loss of the customers’ funds.

Moreover, FINRA found that the firm allowed its registered representatives to send consolidated statements to their customers but never reviewed the consolidated statements a representative sent to some customers to determine whether he was following the firm’s procedures regarding pricing. Because of the inaccurate pricing the representative used, and the firm’s lack of supervision, these customers received statements with erroneous pricing information.

The suspension is in effect from June 3, 2013, through July 17, 2013. (FINRA Case #2010022963602)

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870

Dennis Van Patter Investigation-VSR Financial-Plano, Texas

We are investigating VSR Financial Services stockbroker  Dennis Van Patter on behalf of one of his former customers whose account suffered significant losses. The subject account of our elderly lady client was invested in a number of alternative investments that appear unsuitable given her age, limited net worth and lack of financial sophistication.

The investments in non-conventional products such as real estate investment trusts (REITs), oil and gas limited partnerships and tax credit entities include the following:

  • APC 2003B
  • ATEL Fund 
  • Atlas Energy Public-17-2008B
  • Atlas Energy Public 18 2009B
  • Behringer Harvard REIT 1
  • Boston Capital Series L.P. 16-29 
  • CNL Lifestyle Fund
  • Cole Credit Property Trust
  • Cypress Equipment Leasing
  • Independence Tax Credit L.P.
  • Inland American Real Estate Trust
  • KBS Real Estate Investment Trust
  • MPF Income Funds
  • Penneco Oil Company 2008-1
  • Retail Properties of America
  • United Development Funding

According to FINRA records, Van Patter is registered with VSR Financial Services, Inc. a broker dealer with offices nationwide. Van Patter operates through First Financial Services Group in Plano, Texas.

Real estate investment trusts, especially those not traded on a
conventional exchange, as well as other alternative investments such as oil and gas and other limited partnerships are generally not considered suitable for retired conservative investors.

If you have losses in an account handled by Dennis Van Patter, you may be entitled to damages. Call to discuss your options.

Rex Securities Law , with offices in Boca Raton, FL,  and  Austin, TX,   provides representation to  investors  nationwide who are seeking recovery of investment losses due to the negligence or fraud of stockbrokers and broker dealers. If you have questions about how your account has been handled, call to speak with an experienced securities attorney.

Most cases handled on a contingent fee basis meaning that you do not pay legal fees unless we are successful.

Nationwide Representation

Rex Securities Law

TollFree: 877-224-3199

Florida-561 391 1900 

Texas-512-329-2870