Private Placements

Published on: October 24, 2012

Domin-8 Private Placement Investors Could Recover Losses

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in a Domin-8 private placement. Domin-8 is a provider of “advanced enterprise software applications and related services to the U.S. multi-family housing property management industry” based out of Ohio, according to its filing with the Securities and Exchange Commission.

Domin-8 Private Placement Investors Could Recover Losses

Because private placements like Domin-8 are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors, according to investment fraud lawyers. Private placements allow smaller companies to use the sale of debt securities or equities to raise capital without it becoming necessary for them to register these securities with the Securities and Exchange Commission. One Domin-8 private placement, Domin-8 7 percent Series C Senior Subordinated Convertible Dentures, began its attempt to raise $10,000,000 in the latter part of 2007.

FINRA Executive Vice President and Chief of Enforcement, Brad Bennett, has stated that, “FINRA continues to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers.”

Published on: October 19, 2012

Geneva Organization TIC Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who have suffered significant losses as a result of their investment in a Geneva Organization tenant-in-common, or TIC.

Geneva Organization TIC Investors Could Recover Losses

A real estate investment company founded by Duane Lund in 2003, the Geneva Organization specializes in pooling individual investors into larger groups to buy commercial real estate. According to investment fraud lawyers, many broker-dealers’ may have improperly recommended Geneva Organization TIC investments to investors. Specifically, these TIC investments granted investors interests in One Southwest Crossing, a building in Eden Prairie.

TICs are complicated deals that allow real estate sellers to avoid capital-gains tax by rolling their proceeds into other properties, receive a regular income from the investment — and, in the event of the investor’s death, the asset can be bequeathed to heirs. TICs are also known as 1031 exchanges and, despite these attractive benefits, they are not appropriate for many investors but, rather, are only suitable for some specialized clients.

Published on: October 18, 2012

Layton Energy Wharton LP Investors Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in a Layton Energy Wharton LP product. As a Texas-based energy company, Layton Energy Wharton offers various private placements, one of which is Layton Energy Wharton LP. Launched in 2007, this investment’s aim was to raise $10,000,000 for the purpose of acquiring interests in oil and gas deals, according to its filing with the Securities and Exchange Commission.

Layton Energy Wharton LP Investors Could Recover Losses

According to securities arbitration lawyers, because private placements like Layton Energy Wharton LP are typically more complicated and carry more risk than other traditional investments, they are usually only suitable for sophisticated, high-net-worth investors. Private placements allow smaller companies to use the sale of debt securities or equities to raise capital without it becoming necessary for them to register these securities with the Securities and Exchange Commission.

FINRA Executive Vice President and Chief of Enforcement, Brad Bennett, has stated that, “FINRA continues to look closely at sales of private placements to determine whether the selling firms are fulfilling their responsibilities to customers.”

Published on: October 10, 2012

FINRA Targets Non-traded REITs

by InvestorLawyers

According to stock fraud lawyers, the Financial Industry Regulatory Authority has and will continue to relentlessly target non-traded real estate investment trusts, or REITs. Specifically, the regulatory authority is focusing on how broker-dealers sell these investments and potential shortcomings in their strategies. According to the Executive Vice President of Member Regulation Sales Practices at FINRA, Susan Axelrod, examiners at FINRA have been scrutinizing “numerous retail sellers of non-traded REITs.” Axelrod also stated that, “In several instances, FINRA examiners have found that firms selling these products failed to conduct reasonable diligence before selling a product and failed to make a determination that the product was suitable for investors.”

FINRA Targets Non-traded REITs

Investment fraud lawyers note that independent broker-dealers have a responsibility to perform adequate due diligence when selling any investment, especially complex, illiquid products. Since the 2008 market collapse, FINRA has been aggressive with broker-dealers who failed to do so. Axelrod stated to the Securities Industry and Financial Markets Association’s Complex Products Forum that, “FINRA examiners have noted that in the instances of REITs that have experienced financial difficulties, red flags existed and should have been considered by firms prior to the product being offered to firm clients.”

Another problem with non-traded REITs, according to Axelrod, is that “non-traded REITs may also borrow funds to make distributions if operating cash flow is insufficient, and excessive borrowing may increase the risk of default or devaluation. In addition, non-traded-REIT distributions may actually be a return on principal.”

Published on: October 4, 2012

Advanced Equities Investors May Have Securities Arbitration Claim

by InvestorLawyers

Securities arbitration lawyers are currently investigating claims on behalf of Advanced Equities customers who invested in what reportedly was known as Bloom Energy, a Silicon Valley alternative energy company. On September 18, the Securities and Exchange Commission charged co-founders Keith G. Daubenspeck and Dwight O. Badger, a FINRA registered broker-dealer, and Advanced Equities Inc. in connection with the private offerings of an alternative energy company offered in 2009 and 2010. According to the allegations, Advanced Equities misled investors and failed to adequately supervise the offerings in two private equity offerings.

Advanced Equities Investors May Have Securities Arbitration Claim

Reportedly, Daubenspeck is the parent company’s board chairman and Badger was the parent company’s former chief executive. Together, they founded Advanced Equities. The SEC has stated that the sales effort was led by Badger, who misstated facts about the finances of the energy company, and Daubenspeck failed to correct these misstatements, which resulted in a failure to adequately supervise.

One of these misstatements, according to the SEC and stock fraud lawyers, occurred in the 2009 offering when Badger said the company had order backlogs amounting to more than $2 billion when, in fact, this amount never exceeded $42 million. In addition, he said a national grocery store chain had placed a $1 billion order when, in reality, it was only a $2 million order, with a non-binding letter of intent for future purchases, that had been placed by the store. Badger also stated that a U.S. Department of Energy loan had been granted to the company that exceeded $250 million, but only a $96.8 million loan had been applied for. This loan application misstatement was repeated in 2010 during the follow-up offering. Reportedly, Daubenspeck, when hearing these misstatements during his participation in at least two internal sales calls, remained silent. No reasonable corrections were made despite these red flags and, as a result, an obvious risk of investors receiving this false information went unchecked. According to securities arbitration lawyers, when misstatements like this are made in an internal sales call to brokers, it is likely that the brokers will unknowingly pass this false information to investors.

Published on: September 21, 2012

Customers of Ray Lucia Sr. Could Recover Losses Through Arbitration Following SEC Allegations

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment with Ray Lucia Sr. and his affiliated broker-dealers. Reportedly, the Securities and Exchange Commission has charged Lucia and his company, formerly known as Raymond J. Lucia Companies Inc. (RJL), for using misleading information at a series of investment seminars when soliciting for his “Buckets of Money” strategy.

Customers of Ray Lucia, Sr. Could Recover Losses through Arbitration, Following SEC Allegations

According to the allegations issued by the SEC’s Division of Enforcement, Lucia claimed that this wealth management strategy had been thoroughly “backtested” over real bear market periods. He allegedly made these claims while promoting Buckets of Money at seminars where he presented a lengthy slideshow indicating that retires would receive inflation-adjusted income while protecting and increasing savings through his wealth management program. In truth, however, despite publicly made claims, little, if any, backtesting was done by RJL and Lucia on the Buckets of Money strategy.

These seminars were held in hopes of obtaining advisory clients, according to the SEC’s order which instituted administrative proceedings against RJL and Lucia. These clients would then be charged advisory services fees. Lucia’s radio show and personal and company website promoted the seminars.

Published on: September 17, 2012

What Went Wrong with Dividend Capital REIT: What Many Investors Didn’t Know

by InvestorLawyers

Securities fraud attorneys have been investigating claims on behalf of investors who suffered Dividend Capital Trust investment losses, but what exactly went wrong?

What Went Wrong with Dividend Capital REIT: What Many Investors Didn't Know

According to investment fraud lawyers, while most REITs experience value changes every day because they are traded on stock exchanges, “non-traded,” “private,” or “unlisted” REITs were not traded on exchanges with regulations. Furthermore, these investors of non-traded REITs paid additional layers of fees because the investments were mostly sold by brokers. Generally, investors were promised stable prices and healthy income generation from these investments, but the decline in the commercial real estate market and management problems have resulted in a significant decline in the value of many non-traded REITs.

Many brokers unsuitably recommended non-traded REITs; after all, they were extremely profitable to them thanks to the hefty fees associated with the investment. Many brokers told investors that the REITs values would remain the same while providing income, but many non-traded REITs have temporarily — or indefinitely — suspended payments to investors. That said, securities fraud attorneys note that most public REITs that have been responsibly managed are providing reliable income to their investors.

Published on: September 14, 2012

Cole Credit Property Trust II May be Following in the Footsteps of Other Non-traded REITs

by InvestorLawyers

Investment fraud lawyers are currently investigating claims on behalf of investors who were improperly sold various non-traded REIT investments and suffered significant losses as a result. Reportedly, Cole Credit Property Trust II is currently in the process of executing its “exit event.” In this event, a non-traded Real Estate Investment Trust either performs an initial public offering or sells its assets.

Cole Credit Property Trust II May be Following in the Footsteps of other Non-Traded REITs

In recent events, other non-traded REITs have gone through this process and securities fraud attorneys say that, in most cases, the event does not go well for investors. As a result of the exit event, many REITs have experienced a significant decline in the offering — often amounting to 30 percent or more of the investment’s value.

As the seventh-largest non-traded REIT in the industry, Cole Credit Property Trust II has invested assets amounting to nearly $3.4 billion. Reportedly, Morgan Stanley and UBS Investment Bank have been hired by Cole Credit Property Trust II to explore their options for the exit event. Investment fraud lawyers encourage Cole Credit Property Trust II investors to closely monitor the REIT’s valuation as, despite an estimated valuation of $9.35 per share, the trend in previous non-traded REITs indicates that the market may not be so kind to the per share valuation.

Published on: September 10, 2012

Dividend Capital REIT and Seven Other Non-traded REITs Suffer Significant Losses

by InvestorLawyers

Securities arbitration lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in eight of the biggest non-traded REITs, including Dividend Capital Total Realty Trust Inc. According to a recent analysis, over the last seven years, eight of the biggest REITs have lost 37 percent of their equity value, or around $11.3 billion.

Dividend Capital REIT and Seven Other Non-Traded REITs Suffer Significant Losses

In July, Dividend Capital Total Realty Trust Inc. revised its per share value to $6.69, down from its March value of $8.45 per share. The Dividend Capital REIT raised $1.8 billion at a $10 per share price. Dividend Capital REIT president, Guy Arnold, failed to return calls seeking comment on the REIT’s performance. For more information about the Dividend Capital REIT, see the previous blog post, “Dividend Capital REIT Restructuring Could be a Sign of Trouble.”

Another non-traded REIT, CNL Lifestyle Properties Inc., experienced a share price drop to $7.31. The CNL Lifestyle Properties REIT raised $2.7 billion at a $10 per share price, according to investment fraud lawyers.

Published on: September 6, 2012

CNL Lifestyle Properties REIT Investors Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who have suffered significant losses as a result of their investment in CNL Lifestyle Properties Inc. Reportedly, a recent announcement from CNL Lifestyle Properties stated that its per share value estimate has dropped from its original share price of $10 to $7.31. This decline represents a drop of 27 percent, which could mean significant losses for many investors. Furthermore, the REIT is reportedly cutting investor dividends, or distribution.

CNL Lifestyle Properties REIT Investors Could Recover Losses

Financial Industry Regulatory Authority rules have established that brokers and firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance.

The CNL Lifestyle Properties REIT is, according to investment fraud lawyers, another in a long line of non-traded REITs currently under investigation. REITs typically carry a high commission which motivates brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs, such as the CNL Lifestyle Properties REIT, carry a relatively high dividend or high interest, making them attractive to investors. However, these investments are inherently risky and illiquid, which limits access of funds to investors. This becomes a major problem for investors, especially retired individuals, who may need to access their funds when the need arises. For more information on REITs, see the previous blog post “FINRA Investor Alert: Public Non-Traded REITs.”