Category Archives: NonTraded Business Development Companies

Thomas P. Smith-Former Titan Securities Broker-Discloses Customer Dispute Over Alternative Investment-Arlington, TX

April 2017-Arlington, Texas

The FINRA records of  Thomas P. Smith ,  a   stockbroker who is currently registered with Center Street Securities disclose a pending customer dispute.

The Financial Industry Regulatory Authority (FINRA) is the agency that licenses and regulates stockbrokers and brokerage firms. FINRA requires brokers and brokerage firms to report customer complaints and disputes as well as regulatory sanctions. In addition brokers are required to disclose certain financial matters such as personal bankruptcies, judgments and liens.

In currently pending FINRA case #16-3184 a customer of his prior employers Titan Securities & Newbridge Securities alleges damages of $250,000 for negligence, violations of the Texas Securities Act and other claims related to the purchase of a non-traded alternative investment.

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. Many of the alternative investments sold over recent years are not traded on any public market making them difficult to value and even more difficult to liquidate if cash is needed.

 

Smith has been employed by Center Street Securities since 5/2016. He was with Titan Securities from 8/2011-6/2016 and with Newbridge Securities 6/2010-8/2011. Smith discloses a business relationship with Bering Financial in Arlington, TX.

If you have losses in an account in an account handled by Thomas P. Smithcontact us to discuss how you may be able to recover damages for those losses.

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

Charles Kulch Investigation-NEXT FInancial/Investors Capital Broker-Nashua, NH

April 1, 2016- Nashua, New Hampshire

FINRA records report that NEXT Financial Group stockbroker Charles Kulch , of Nashua ,New Hampshire,  lists two customer disputes:

  • FINRA Case 15-0762-the customer alleges that NEXT Financial Group misrepresented the special risks associated with investments in certain tenant in common (TIC) investments, and that the investments were unsuitable as the fees and risks far outweigh the potential tax deferment. Damages are alleged to be $4,500,000.
  • FINRA Case 15-0813-alleges suitabililty and misrepresentation regarding investments made with the registered representative between August 2004 and November 2008 while Kulch was employed with Investors Capital Corp and NEXT FInancial Group.  Investments are oil & gas , real estate and limited partnerships. Damages are alleged to be $499,000.

Kulch has been named in four regulatory matters. See FINRA records for details. 

 

If you have losses in an account handled by Charles Kulch, contact us to learn how you may be able to recover damages from his employer.

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 Services Ordered to Pay Couple $307,000 For Recommendation of Alternative Investments

February 17, 2016

A FINRA (FInancial Industry Regulatory Authority) arbitration panel recently ordered VSR Financial Services to pay  a Louisiana couple  over $300,000 in damages for losses on non-traded real estate investment trusts (REITs), promissory note programs, limited partnerships and private oil drilling programs. FINRA Case # 15-00834.

Some of the specific investments at issue in this case were:

  • MPF Senior Note Program
  • Atlas America Series #25-2004B
  • AmREIT Monthly Income & Growth II
  • Cole Credit Property Trust
  • ArciTerra Note Fund II

The claimants alleged that VSR Financial and broker Michael Shaw, committed fraud, breached their fiduciary duty, were negligent, misrepresented the investments and other claims.

In May 2013, VSR Financial was sanctioned by FINRA in connection with the sale of alternative investments. See this for more details on that regulatory matter. 

If you have losses in your account at VSR Financial Services, contact us for more information.

For more information on VSR Financial and its brokers in the Plano, Texas area and elsewhere, see this. 

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 VFG Securities in Plano, Texas- Sale of REITs & Alternative Investments

February 17, 2016- Plano, Texas

Rex Securities Law is investigating VFG Securities, a broker dealer headquartered in Culver City California, with offices in Plano, Texas, in connection with the sale of real estate investment trusts (REITs), direct participation programs (DPPs) and other alternative investments.

According to a recently filed regulatory complaint, FINRA alleges that VFG Securities failed to supervise its brokers properly, allowing them to over concentrate the portfolios of customers with risky and illiquid investments, including REITs and DPPs.

A book, The Wealth Code, authored by VFG’s president Jason B Vanclef is alleged to have been improperly used as a sales tool by VFG SecuritiesSee this for more details. 

According to VFG’s website they have several registered representatives in Plano, Texas, including the following:

John M. Brady-registered with VFG Securities since 11/2010.

Scot A. Clevenger-registered with VFG Securities from 2/2012-5/2013 and 5/2014-present.

Mark Trewitt-registered with VFG Securities since 11/2010. According to his FINRA record, in 9/2014 a customer complained that his $25,000 investment in KBR Barons Cove had been misappropriated . That matter was settled for $25,000.

If you have information you believe would be helpful to our investigation, please contact us. If you have losses in an account at VFG Securities, contact us to discuss how you may be able to recover damages.

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 Pays $3.74 Million To Settle Investor Claim

VSR Financial Services and their co-defendants settled a case involving high risk, illiquid alternative investments for $3.74 million. The case, Gordon B. McLendon, Jr. and Tri-State Theaters vs. Chapman Hext & Co. , et al, Cause No. 12-01326 was prosecuted in Dallas County district court.

The plaintiffs alleged that from 2006-2008 VSR Financial Services broker, Charles E. Chapman recommended they purchase about $7 million worth of the following illiquid investments:

  • Icon Leasing Fund Eleven
  • NetREIT 2006 Program
  • Passco Real Estate Enterprises
  • Waveland Drilling Partners 2007
  • ATEL Growth Capital Fund III
  • Bradford Drilling Associates XXIII
  • Cypress Equipment Fund 13
  • LEAF Equipment Leasing Income Fund III
  • Mewbourne EnergyPartners 07-A
  • Cypress Income Fund VI
  • CNL Income Properties
  • Bradford XXV
  • NetREIT 2008
  • DBSI 2006 Notes

FINRA records indicate that Chapman is not currently registered with FINRA. His recent registration history is listed as:

  • Berthel Fisher & Co.                6/2009-20/2013
  • VSR Financial Services           8/1999-6/2009

FINRA fined VSR Financial $550,000 in 2013 for failing to establish and enforce a reasonable supervisory system regarding the sale of this type of investments, known as alternative or non-conventional investments.

If you suffered damages as a result of the recommendation of your broker that you purchase high risk alternative investments, contact us to learn more about your options.

We currently have a number of cases pending against VSR Financial Services that involve alternative investments. See this 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

FINRA Concerned About–Non-Traded REITs, BDCs, ETFs

Each year the Financial Industry Regulatory Authority (FINRA) publishes a letter highlighting the areas of significance to its regulatory endeavor. This year, the letter discusses concern regarding whether or not complex investment products are suitable.

The specific products enumerated in the letter are not new to any of us. Most have been around, and in some cases, causing problems for retirees attempting to live on fixed income, for quite a while.  The products considered complex and potentially unsuitable are:

Business Development Companies (BDCs)-typically closed end investment companies. Some invest in the corporate debt and equity of private companies and may offer high yields through leverage related risk. FS Investment Corp, Corporate Capital Trust, FS Energy Power Fund, Business Development Corp. of America, VII Peaks, Sierra Income Fund and HMS Income Fund are some of the largest BDCs.

Leveraged Loan Products– these are adjustable-rate loans offered by finanical institutions. They have low credit quality and a high debt to equity ratio. According to FINRA, since August 2012, the funds have taken in more than $5 billion.

Commercial Mortgage-Backed Securities (MBS)- FINRA has a heightened concern about the sale of these fixed-income instruments to retail investors (mom and pop). FINRA’s concern is that the selling companies are not doing enough to apprise buyers of the potential risks.

High Yield Debt Instruments– In September 2012 investors put nearly $9 billion into high yield bond funds.

Exchange Traded Funds and Notes– (ETFs and ETNs) FINRA is concerned retail investors may not understand the differences among exchange-traded index products and that selling brokers may have some confusion as well.

Non-Traded REITs– Investors have been alerted to the problems with these investments, which include REITs like, Behringer Harvard, KBS. Dividend Captial, CNL Lifestyle, Wells, Hines, Inland American & Inland Western for quite a while now. FINRA is concerned purchasers may not fully understand sales costs charged and that distributions may come from principal (ie; your own money) rather than income.

The letter also expresses concern about the sale of Closed-End Funds, Municipal Securities and Variable Annuities. With regard to annuities, the concern is whether the investment is suitable, whether the broker himself understands the product, the liquidity needs of the purchaser and the adequacy of risk disclosure.

If you have questions about losses in your brokerage account, please do not hesitate to contact us. We have been helping investors recover stock market losses for 25 years.

Nationwide representation.

Free consultation.

Rex Securities Law

561 391 1900