Oil field at sunset.
On October 4, 2016, the Texas State Securities Board (the “Board”) entered a Disciplinary Order (“Order”) against Respondents Calton & Associates, Inc. (CRD# 20999) (“Calton”) and stockbroker M. F. Long II (CRD# 1778299) (“Mickey Long”). The Respondents consented to the entry of the Order and its associated findings of fact and conclusions of law.
The Order indicates that, from June 6, 2002 – June 30, 2016, Mickey Long was registered with the State of Texas as an agent of VSR Financial Services, Inc. (“VSR”). For the majority of that time frame, Mickey Long was registered as an investment adviser representative of VSR. On June 30, 2016, Mickey Long applied for registration with the State of Texas as an agent of Calton.
The Order further states that while “[r]egistered as an investment adviser representative and agent of VSR, Respondent routinely recommended that Respondent’s clients invest in non-listed real estate investment trusts (“non-listed REITs”) and interests in exploratory drilling programs sold through private offerings.” VSR allegedly categorized these investment products as ‘High Risk/Moderate’ and ‘High Risk/Aggressive’, and moreover, required the broker recommending such investments to conduct a comprehensive suitability analysis, taking into account factors including “[t]he client’s financial status; the client’s investment experience; the client’s stated investment objectives and their risk tolerance; and the client’s investment knowledge.”
Based on its findings of fact, the Board determined that Respondent’s recommendations constituted “[i]nequitable practices in the sales of securities” in derogation of Section 14.A(3) of the Texas Securities Act (“Act”). Accordingly, the Order calls for Mickey Long’s suspension from selling securities in the State of Texas for 45 days. In addition, the Order sets forth a permanent bar in connection with Respondent recommending or selling any alternative investment, to include any non-listed REITs, non-listed business development companies (“BDCs”), or any security sold pursuant to a private placement. Finally, the Order calls for Respondent Calton to undertake heightened supervision of Mickey Long for a period of two (2) years from the entry of the Order.
Publicly available information through FINRA BrokerCheck indicates that Mickey Long has been subject to a total of fourteen customer complaints. Of these complaints, six have resulted in settlement and four complaints remain pending. Of these pending complaints, allegations include claims of misrepresentations, breach of fiduciary duty, negligence, as well as “highly concentrated various illiquid and highly unsuitable investments.”
There are numerous risks associated with investing in so-called alternative investments such as non-listed REITs and BDCs, as well as private placement offerings. Perhaps the greatest risk associated with such investments has to do with their illiquid nature. Often, uninformed investors find out too late that they cannot readily exit their investment position in a non-listed security or in a private placement. In many instances, such investments are only permitted to be recommended and sold to accredited and/or sophisticated investors.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in representing investors who have incurred losses in connection with various alternative investments, including private placement offerings in a range of industries such as oil and gas drilling funds, in addition to various non-listed securities (whether publicly registered or private). Investors may contact our office at (866) 966-9598 or via email at newcases@investorlawyers.net for a no-cost, confidential consultation.