FINRA Arbitration

Published on: March 1, 2018

Inventrust Shares Subject of $1.49 A Share Tender Offer- Investors Face Heavy Losses

Money Bags In the past six months alone, several third-party real estate investment firms have launched unsolicited tender offers to purchase InvenTrust Properties Inc. (“InvenTrust”) shares at a significant discount. InvenTrust investors may have arbitration claims to be pursued before FINRA, in the event that their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the broker. According to its website, InvenTrust is a “[p]remier, pureplay REIT that owns, leases, redevelops, acquires and manages open-air centers in key growth markets…”

Based on publicly available information through filings with the SEC, InvenTrust was incorporated as Inland American Real Estate Trust, Inc. in October 2004 as a Maryland REIT (the company changed its name in April 2015). As a publicly registered, non-traded REIT, InvenTrust was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or money manager. Through the initial offering, shares were purchased at $10 per share.

Recently, several unsolicited tender offers have been made by certain third-party real estate investment firms for InvenTrust shares. For example, on or about September 2017, MacKenzie Realty Capital (“MacKenzie”) launched an unsolicited tender offer to purchase up to 10,000,000 shares at a price of $1.49 per share. More recently, Liquidity Partners Trust I, filed disclosure paperwork with the SEC in connection with their tender offer for purchase of up to 2,000,000 shares of InvenTrust at a price of $1.55 per share.

Published on: February 28, 2018

Investors In Non-Conventional Investments and REITs Face Suspended Redemptions

by InvestorLawyers

money whirlpool Investors who have recently tried to redeem investments made in real estate investment trusts (REITs) or limited partnerships (LPs) may have encountered an unpleasant surprise – many sponsors of such investments have ended or suspended redemption programs for investors.

Redemption programs are mechanisms by which investors in non-publicly traded securities may sell their securities back to the sponsor or the company for a stated price, sometimes with certain restrictions.

Redemption programs in many of the larger-capitalization REIT and LP investments recommended by financial advisors and stockbrokers have been suspended in recent years. Since these investments are not generally traded on any conventional exchange, there may be a limited or no market should you want or need to liquidate your investment in these non-traded financial products.

Published on: February 28, 2018

Everest REIT Investors Launch Tender Offer for Griffin-American Healthcare REIT III Shares – Investors May Have Arbitration Claims

by InvestorLawyers

Apartment Building Investors in Griffin-American Healthcare REIT III (“GAH REIT III”), may have FINRA arbitration claims, if their investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the broker or financial advisor. GAH REIT III is sponsored by American Healthcare Investors and Griffin Capital Company, LLC, firms that according to publicly available information have completed transactions totaling approximately $30 billion in commercial real estate investments since 1990, of which approximately $8 billion in transactions have been healthcare-related.

GAH REIT III is a publicly registered non-traded real estate investment trust (“REIT”) incorporated in January 2013 as a Maryland REIT and is registered with the SEC. As such, GAH REIT III was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the IPO upon the recommendation of a broker or money manager.

Recently, third party real estate investment firms Everest REIT Investors I LLC and Everest REIT Investors II LLC launched a $6.5 million tender offer for up to 1 million shares of GAH REIT III, at $6.50 per share. The offer is set to expire on March 20, 2018. Currently, Everest and its affiliates own 19,700 shares of GAH REIT III.

Published on: February 27, 2018

LJM Preservation and Growth Fund Plummets In Value During VIX Spike

by InvestorLawyers

Wastebasket Filled with Crumpled Dollar Bills Investors in the LJM Preservation and Growth Fund suffered substantial losses in early February, 2018 as volatility in broad stock market indices spiked. LJM Preservation and Growth Fund (“LJM P&G Fund” or the “Fund”) (LJMAX, LJMCX, LJMIX) is a mutual fund advised by LJM Funds Management, Ltd., (“LJM”). LJM is headquartered in Chicago, IL, and was founded in 2012, as an affiliate of LJM Partners, an investment management firm that has been managing alternative investment strategies since 1998.

Since its inception in 2013, the LJM P&G Fund has employed an investment strategy that “seeks capital appreciation and capital preservation with low correlation to the broader U.S. equity market. The Fund attempts to profit, primarily, from the volatility premium – the spread between implied volatility (investors’ forecast of market volatility reflected in options pricing) and realized (actual) volatility. The Fund aims to capture this premium by writing (selling) call and put options on S&P 500 Index futures.”

A put option is a contract that allows the purchaser of the underlying contract to sell a security at a specified price (the strike price). This allows the purchaser to hedge a position or a portfolio, by essentially creating a price floor, where a drop in a security price below a certain level will nevertheless deliver a profit on the option contract. Conversely — when an investor, or institutional fund manager, sells a put option — the seller is betting that the price will stay higher than the option price. And in instances when the seller of the option contract does not own the underlying security, then the seller is engaged in naked option writing. This is an inherently risky strategy fraught with risk; in fact, some market pundits have referred to selling naked puts as “picking up nickels in front of a steamroller.”

Published on: February 27, 2018

FINRA Warned of Risks of VIX-Linked Exchange Traded Products

by InvestorLawyers

stock market chart A recent spike in stock market volatility has brought into focus the enormous risks associated with certain exchange-traded-products (ETPs) linked to the Chicago Board Options Exchange (CBOE) Volatility Index (VIX). However, these products have previously been the subject of several warnings by the Financial Industry Regulatory Authority (FINRA).

Created in 1993, the VIX attempts to track broadly measured volatility in the market. VIX is an index, not a security, but certain ETPs have attempted to allow investors to track the performance of the VIX index. One such ETP is Credit Suisse’s VelocityShares Daily Inverse VIX Short-Term ETN (ticker symbol XIV), which the issuer shuttered earlier this month after investors experienced unexpectedly large losses during a spike in the VIX. Other ETP products that may pose similar risks include Proshares SVXY, VelocityShares ZIV, iPATH XXV, and REX VolMaxx VMIN.

ETPs have previously come under scrutiny by FINRA. In October of 2017, FINRA ordered Wells Fargo to pay $3.4 million in restitution to investors relating to unsuitable recommendations of volatility-linked ETPs. FINRA also has published Regulatory Notice 17-32, regarding sales practice obligations, which cautions brokerage firms that many volatility-linked ETPs are highly likely to lose value over time and may be unsuitable to retail investors, particularly those who plan to use them as traditional buy-and-hold investments. Previously, in 2012, FINRA called for heightened supervision by brokerage firms regarding complex investment products in Regulatory Notice 12-03, specifically warning of the risks posed by investment products tied to the VIX.

Published on: February 26, 2018

ARC NYC REIT Increases its Defensive Tender Offer – Investors May Have Arbitration Claims

by InvestorLawyers

Building Demolished Investors in American Realty Capital New York City REIT (“ARC NYC REIT”), may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (“FINRA”), if their ARC NYC REIT investment was recommended by a financial advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the broker or financial advisor. According to its website, ARC NYC REIT is structured to provide its investors with a combination of current income and capital appreciation through strategic investments in high-quality commercial real estate located throughout the five boroughs of New York City.

A publicly registered non-traded real estate investment trust (“REIT”), ARC NYC REIT was incorporated in December 2013 as a Maryland REIT and is registered with the SEC. Accordingly, ARC NYC REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the initial public offering (“IPO”) upon the recommendation of a broker or money manager.

In early 2018 — a Tel Aviv, Israel based private real estate investment fund, Comrit Investments 1 LP (“Comrit”) — launched an unsolicited tender offer to purchase up to 1.6 million shares of ARC NYC REIT for $14.68 per share. In response, ARC NYC REIT’s Board countered with a defensive tender offer, to purchase up to 1.9 million shares at a price of $15.50 per share. Both of these tender offers were set to expire on March 6, 2018.

Published on: February 23, 2018

Inverse ETF Investors Lose Millions As VIX Index Skyrockets

by InvestorLawyers

Investors who bought into inverse volatility-linked exchange traded funds (ETFs) on the recommendation of their broker or financial advisor may be able to recover their losses in FINRA arbitration. Inverse volatility-linked investments are designed to return a profit when the market experiences periods of calmness, or low volatility. However, unlike more traditional investments and strategies such as a buy-and-hold stock portfolio, investing in volatility-linked products is extremely complex and risky, and therefore, not likely a suitable strategy for the average, retail investor.

Certain inverse ETFs are structured to provide investors with returns that are positive when the CBOE Volatility Index (the “VIX”) falls, and negative when the VIX rises, and investors in these products essentially are taking the view that the market will remain relatively steady. However, earlier this month stock market volatility and the VIX rose rapidly as the stock market whipsawed erratically.

ETFs that lost value during this market turmoil include the following:

Published on: February 22, 2018

American Finance Trust Shares Subject of Competing Tender Offers

by InvestorLawyers

Apartment Building Investors in American Finance Trust (“AFIN”), formerly known as American Realty Capital Trust V, Inc., may have arbitration claims to be pursued before the Financial Industry Regulatory Authority (“FINRA”), if their AFIN position was recommended by an investment advisor who lacked a reasonable basis for the recommendation, or if the nature of the investment was misrepresented by the stockbroker or financial advisor. According to its website, AFIN is structured to protect shareholder capital and produce stable cash distributions through the acquisition and management of a diversified portfolio of commercial properties leased to investment grade tenants.

AFIN is a publicly registered non-traded real estate investment trust (“REIT”) that is based in New York, NY. Incorporated in early 2013 as a Maryland REIT, AFIN is registered with the SEC, and therefore, the non-traded REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated retail investors who bought shares through the initial public offering (“IPO”) upon the recommendation of a broker or money manager.

According to publicly available information through the SEC, MacKenzie Capital Management LP (“Mackenzie”) recently made an unsolicited tender offer to purchase up to 1 million shares of AFIN common stock at $13.66 per share. This tender offer is set to expire on March 22, 2018, unless extended.

Published on: February 22, 2018

Woodbridge Bankruptcy Update: Judge Approves Settlement Agreement Calling For Board of Managers

by InvestorLawyers

House in Hands As highlighted in our previous blog posts concerning the Woodbridge Group of Companies (“Woodbridge”) of Sherman Oaks, CA, Woodbridge filed for Chapter 11 bankruptcy on December 4, 2017, in Delaware Bankruptcy Court (Case No. 17-12560-KJC). Thereafter, on December 21^st, the Securities and Exchange Commission (“SEC”) formally filed charges against Woodbridge and its owner and former CEO, Robert Shapiro, alleging that “[D]efendant… used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings.”

By January 2, 2018, the SEC further alleged, among other things, that the timing of the Chapter 11 proceeding called into question whether Mr. Shapiro had preemptively sought bankruptcy protection, in the first instance, in order to shield himself from impending charges of misconduct, and sought appointment of an independent trustee.

On January 23, the SEC announced a resolution under which the Bankruptcy Court for the District of Delaware approved a settlement Term Sheet, calling for the appointment of a new Board of Managers consisting of representatives recommended by the parties which will take necessary actions for managing Woodbridge, with the first course of action to be selecting a CEO or Chief Restructuring Officer for the Debtors. The Term Sheet also calls for the formation and appointment of Unitholders and Noteholders committees to represent the interests of investors who purchased Woodbridge notes and unit investments.

Published on: February 21, 2018

Investors in Credit Suisse’s VelocityShares Daily Inverse VIX Short Term ETN May Have Arbitration Claims

by InvestorLawyers

financial charts and stockbroker Investors who bought into Credit Suisse’s Velocity Shares Daily Inverse VIX Short Term Exchange-Traded Note (“XIV”) on the recommendation of their broker or financial advisor may be able to recover their losses in FINRA arbitration. As we discussed in several recent blog posts, inverse volatility-linked investments are designed to return a profit when the market experiences periods of calmness, or low volatility. However, unlike more traditional investments and strategies such as a buy-and-hold stock portfolio, investing in volatility-linked products is extremely complex and risky, and therefore, not likely a suitable strategy for the average, retail investor.

By design, Credit Suisse’s XIV was structured to provide investors with the opposite return of the CBOE Volatility Index (the “VIX”), or the so-called ‘fear-index’, and was thus essentially a bet that the market would remain calm. Earlier this month — as the market’s prior 12-month rally gave way to a sharp rise in volatility and an approximate 8% loss in the S&P 500 index, this inverse or short volatility trade proved to be an absolute train wreck.

As stocks returned all the year’s gains in trading on Monday, February 5, the VIX skyrocketed to 37 by close of trading, an increase of 95%. Unsurprisingly, many inverse volatility-linked investment vehicles sustained massive losses. Among the hardest hit ETNs was Credit Suisse’s XIV, which plunged approximately 90% in value. In light of XIV’s losses, Credit Suisse recently announced that the last day of trading for VelocityShares Daily Inverse VIX Short-Term Exchange-Traded Note will be Tuesday, February 20, 2018. Credit Suisse has elected to trigger an accelerated liquidation of XIV because the product could no longer perform as it was designed.