Lerner’s Misleading Sales Tactics Cause FINRA to Issue Alert

FINRA reissued its Investor Alert on non-traded REITs as a result of the action filed by FINRA against David Lerner & Associates for failing to investigate the suitability of the investment and for marketing the REITs on its website using misleading returns.

According to the release, FINRA reissued the Alert:

“because of concern that
some investors may be the recipients of misleading information
regarding certain public non-traded REITS. Some investors may also
receive recommendations to purchase these products without adequate
investigation by the firm or individual broker to determine whether
these or similar investments are suitable.”

In their release , FINRA points out some of the same pitfalls of non-traded REITs we have been warning investors about for the past year, including:

  • shares do not trade on a national exchange
  •  the secondary market offers very limited liquidity and shares generally trade at a substantial discount
  • front end fees can be as high as 15% of each dollar invested
  • share prices can fluctuate, up or down

The share price of many non-traded REITs has dropped since the date of issue. In some cases the current value is less than half of the original purchase price. Given the state of the economy, and in particular, real estate, it is not likely that shares will recover to the original purchase price for many of these REITs. 

Couple with this the fact that many REITs have dramatically reduced or eliminated distributions and their lack of liquidity, those who purchased to supplement fixed income have a real problem. 

If you purchased a non-traded REIT based upon misrepresentations, you may be able to recover some or all of your losses. Contact us for further information.

Free consultation. Nationwide representation.

Rex Securities Law

561 391 1900

EIght Major Nontraded REITs– Values Down Sharply

According to a study published in the Investment News analyzing the share value of the eight largest nontraded REITs, these alternative investments have not fared well. According to the study these eight raised over $30 billion, which is now worth less than $20 billion.

Unfortunately retirees, relying on a dependable income stream are some of the hardest hit. Offering share prices were generally $10 for these investments. Here is the “estimated value” as reported by each company:

Retail Properties of America                $3.20
Inland American REIT                         $7.22
Behringer Harvard REIT                      $4.64
Wells REIT II                                     $7.47
KBS REIT I                                        $5.16
CNL Lifestyle Properties                      $7.31
Dividend Capital REIT                         $6.69
Hines REIT                                        $7.78

As implied in their name, nontraded REITs do not trade on any conventional exchange, therefore if liquidity is needed, say for health or living expenses, the only option is a private secondary market. As we have previously reported, these secondary markets discount the company “estimated value” by 25% or more upon sale.

Many investors were convinced to purchase nontraded REITs with promises of dependable income streams, steady value and the ability to sell. Many REITs have ceased distributions and cancelled redemption programs leaving investors with no cash flow and no ability to liquidate.

If you have questions about your REIT investment or other stock market losses, please do not hesitate to contact us. We have been helping investors for over twenty years.
Free consultation.
Nationwide representation.

Rex Securities Law
561 391 1900

CNL REIT Market Value Down over 25%

The market value of non exchange traded real estate investment trusts (REITs) continue to decline. Earlier this week, CNL Lifestyle Properties Inc. became the latest large nontraded REIT to report
a sharp decline in value with its share price dropping to $7.31.
CNL  initially raised $2.7
billion with shares originally priced at $10 a share.

Dividend Capital Total Realty Trust Inc., which raised
$1.8 billion in equity at $10 per share,  recently revised its value to $6.69 per
share, down from  $8.45 a share in March of this year.

 Many brokers sold nontraded REITs to clients and
characterized them as bond alternatives during
the surge in the commercial real estate market, which peaked in  2007. Retirees counting on a dependable stream of income as well as the ability to liquidate their investment in the event of financial emergency have been hit the hardest. Many of these REITs have ceased making distributions and have cancelled their buyback programs. If liquidity is needed, a secondary market, which generally discounts the company “estimated value” by 25% or more is the only option. Assuming such a discount would apply on the liquidation of CNL, the shares would only yield about $5.50. a loss of nearly 50% of the initial purchase price.

For the time being, it appears CNL will continue making distributions, although the annual return is far less than what was touted when they were raising capital. Investors should also be aware that distributions from CNL do not come from income, but rather have been and may continue to be funded with borrowed money. Obviously, incurring debt will likely cause a decline in market value of the investment, meaning you are essentially just getting a distribution of principal.

If you were misled as to the nature of your investment in CNL or any other nontraded REIT, please contact us to discuss your options for recovery of your losses. We have been assisting investors nationwide for over twenty years.

Free consultation.

Rex Securities Law

561 391 1900

Securities Regulator Charges Former Georgia Football Coach with Ponzi Fraud

Former Georgia head football coach Jim Donnan and a business partner were charged by the Securities & Exchange Commission with fraudulently raising $80 million from about 100
investors between 2007 and 2010 in a Ponzi scheme targeting college coaches, former players and others.

A ponzi scheme is perpetuated by using money raised from  investors to pay “returns” to other investors giving the appearance of a successful and ongoing business. In most ponzi schemes there is little or no real business being conducted by the promoter, who as you may have guessed, funnels off a portion, if not most,  of the money for himself.

In Donnan’s scheme, according the the SEC, investors were told that their investment dollars were being used to purchase leftover merchandise from major retailers which was to be sold to discount vendors. Investors were promised inordinately high potential returns of  over 300%. Donnan capitalized on his notoriety as Georgia’s head coach, and later as an ESPN announcer to gather investors.  Donnan is in bankruptcy and investors are fighting over what is left.

If an investment proposition being touted to you sounds too good to be true, it probably is and you should fight the temptation to commit your hard earned dollars to it without fully investigating it.

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 Bars Geneos Wealth Management Broker Marc Duda

Unsuspecting and trusting investors were unaware that the nest eggs they had entrusted their broker with were being used to for his personal expenses……. including his gambling debts.

While working as a registered broker for Geneos Wealth Management, Inc. from 2005-2011, former broker Marc Duda, age 37,  bilked  more than 10 investors , most of which were elderly retirees , out of millions, possibly as much as ten million. Duda told these unsuspecting victims that he was purchasing safe and secure investments while he was actually using their life savings as his personal piggy bank purchasing a plane, a boat, a car, a motorcycle and to make mortgage payments, pay child care expenses and even to fund gambling trips to Las Vegas.

He was able to continue the fraud using the time tested ponzi technique of paying off old investors with money raised from new  victims. He operated two outside businesses KAD Capital Group, LLC and Capistrano  Beach Funding Corporation, where some of the stolen money was directed.

Duda agreed to a permanent bar from association with any FINRA member.

That is the least of his concerns. He was sentenced to 78 months in prison and began serving his time on June 22, 2012. According to Federal Law, Duda will serve a minimum of 85% of his sentence.

Brokerage firms have a duty to supervise and oversee the activities of their brokers, however it appears that Duda’s firm was negligent in overseeing his activities, resulting in financial devastation for many retirees.

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’s Florida Stockbroker Disciplinary Actions-July 2012


The
Financial Industry Regulatory Authority (FINRA) issues a report on
disciplinary and other actions involving registered brokers, investment
advisers and brokerage firms every month.

The significant actions involving brokers in the state of Florida can be found here.

Follow this link to the FINRA website for the entire report for the month of July 2012 as well as to access  earlier time periods.

Rex Securities Law
Recovering
investment losses for victims nationwide for over twenty years. If you
have questions about losses in your brokerage account, please contact
us.
561 391 1900
 

FINRA’s Florida Stockbroker Disciplinary Actions-June 2012

The
Financial Industry Regulatory Authority (FINRA) issues a report on
disciplinary and other actions involving registered brokers, investment
advisers and brokerage firms every month.

The significant actions involving brokers in the state of Florida can be found here.

Follow this link to the FINRA website for the entire report for the month of June 2012 as well as to access  earlier time periods.

Rex Securities Law
Recovering investment losses for victims nationwide for over twenty years. If you have questions about losses in your brokerage account, please contact us.
561 391 1900
 

Nationwide representation of victims of stockbroker fraud and the malpractice of investment professionals.

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