Investor Lawyers Blog
Customers of Voya Financial Advisors, Inc. (“Voya Financial”) may have arbitration claims if they worked with Broker James T. Flynn between 2013 and 2017 or with IFS Securities, Inc. (“IFS Securities”) if they worked with Flynn between 2017 and 2018, and if Mr. Flynn recommended unsuitable securities transactions or made a misleading sales presentation to them. Voya Financial has reportedly paid over $900,000 to date to settle claims brought by Mr. Flynn’s customers.
Flynn (CRD#: 3082615), formerly of Voya Financial and most recently with IFS Securities, has been barred by FINRA and has faced dozens of complaints related to his placement of their funds in variable annuities and non-traded real estate investments (REITs).
Non-traded REITs pose many risks that are often not readily apparent to retail investors, and may not be adequately explained by the financial advisors and stockbrokers who recommend these complex investments. One significant risk associated with non-traded REITs concerns their high up-front commissions, typically between 7-10%. In addition to high commissions, non-traded REITs generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%.
Likely the greatest risk associated with non-traded REITs involves their illiquid nature. Unlike traditional stocks and mutual funds, non-traded REITs do not trade on a national securities exchange. Unfortunately, many uninitiated investors in non-traded REITs have come to learn too late that their ability to exit their investment position is limited. Investors in non-traded REITs can sometimes exit their investment through redemption directly with the sponsor, but such redemptions are limited, both as to timing (often redemptions are only done on a quarterly basis), as well as amount (any redemption will be subject to certain terms, including an overall limit on the aggregate number of shares that the REIT will permit to be redeemed at a given time). Investors may also be able to sell shares through tender offers from time to time, or via a limited secondary market.
Among the many duties and responsibilities that brokers and brokerage firms owe to their clients are the duties to “conduct business with high standards of commercial honor” and “maintain just and equitable principles of trade” (FINRA Rule 2010). In addition, FINRA’s often discussed ‘suitability rule’ (FINRA Rule 2111) mandates, in part, that a broker and his or her employer must seek to ensure that the purchase of a recommended security is in keeping with the customer’s risk profile and stated investment objectives.
NASD Rule 3010 and FINRA Rule 3110 also require brokerage firms such as Voya Financial and IFS Securities to have a system in place to supervise the sales activities of their Registered Representatives. These industry rules require that each member ensure that transactions with customers are reviewed and in certain instances approved by a Supervisor/Principal of the member. Brokerage firms may be held liable by customers for failures to supervise that result in customer losses due to broker misconduct.\
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience representing investors in connection with complex non-conventional investments, including non-traded REITs and business development companies (BDCs). Investors may contact us via the contact form on this website, by telephone at (866) 966-9598, or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation. Attorneys at the firm are admitted in New York, 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).