Private Placements

Published on: July 19, 2012

NHB Holdings Investors Could Recover Losses

Investment fraud lawyers are currently investigating claims on behalf of investors who suffered losses as a result of their investment in NHB Holdings. Operating as a bank holding company, NHB Holdings uses its subsidiary, Proficio Bank, to offer banking services. NHB Holdings is based in Jacksonville, Florida, and was founded in 2007.

NHB Holdings Investors Could Recover Losses

Information now available leads stock fraud lawyers to believe that a Regulation D private placement was offered by NHB Holdings in order to raise capital. Certain FINRA registered broker-dealers offered and sold this private placement. 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. Because these investments 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, because the creation and sale of private placements often carry high commissions, these investments continue to be pushed by brokerage firms despite the fact that they may be unsuitable for investors. 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.

Published on: July 5, 2012

More Trouble for Investors of Behringer Harvard

by InvestorLawyers

Stock fraud lawyers have been investigating claims on behalf of investors of Behringer Harvard Holdings LLC for several months, but recent news shows even more trouble may be ahead for these investors. Apparently, Behringer Harvard is having significant difficulty making loan payments on two of its offerings. As a result, Behringer is losing real estate assets.

More Trouble for Investors of Behringer Harvard

Securities fraud attorneys say that earlier this month, several properties related to the nontraded Behringer Harvard Opportunity REIT I went into bankruptcy protection after negotiations over debt, amounting to $48.3 million, failed. Furthermore, the Behringer Harvard Short-term Opportunity Fund I LP, a private placement, entered into a “deed in lieu of foreclosure agreement.” This agreement was entered into in June 2012 and transferred properties to the lender.

At the end of 2011, Behringer Harvard Opportunity REIT I suffered an estimated value decline of 46 percent. According to stock fraud lawyers, this decline represents a reduction from $7.66 per share a year earlier to $4.12 at the end of 2011. In addition, as of December 31, 2011, Behringer Harvard Short-term Opportunity Fund I LP investors saw their investment drop in value from $6.48 per share on December 31, 2010 to a staggering 40 cents per share. The Short-term Opportunity Fund I had total assets amounting to around $130 million. To make matters worse, the Opportunity REIT I has total assets amounting to $524.4 million, with an additional $68.4 million in debt that will mature this year.

Published on: June 25, 2012

Paladin Realty Income Properties REIT, Wells REIT 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 Wells or Paladin Realty Income Properties REITs.

Paladin Realty Income Properties REIT and Wells REIT Investors Could Recover Losses

Reportedly, investors were recently told by Paladin Reality Income Properties Inc. that its stock would cease to be sold next month because its current scale cannot cover expenses. This comes after it raised, in more than four years, $78.7 million. Reports about Wells Real Estate Funds state that, in an attempt to cut costs, the firm laid off its executive sales staff recently. This is not a good sign for investors, who are hoping their investment will rebound after dividend cuts and price drops.

Securities fraud attorneys have stated that as illiquid, non-traded investments, many REITs are not a suitable investment for all investors. Financial Industry Regulatory Authority rules have established that 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. Furthermore, brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer.

Published on: June 18, 2012

Claim Against Stifel Nicolaus Could Mean More Arbitration Claims for Cardiac Network Promissory Note Investors

by InvestorLawyers

In light of a recent claim against Stifel Nicolaus, securities arbitration lawyers say other investors may come forward to recover losses sustained as a result of their investment in a Cardiac Network Promissory Note. This month, a claim was filed against Stifel to recover losses suffered by an 89-year-old veteran of World War II who suffered losses as a result of his investment in the Cardiac Network Promissory Note.

Claim Against Stifel Nicolaus Could Mean More Arbitration Claims for Cardiac Network Promissory Note Investors

According to securities fraud attorneys, the note was allegedly sold to the claimant, by a representative of Stifel, without prior approval by Stifel. This action is known as “selling away.” Securities brokerage firms have a legal obligation to provide reasonable supervision of their financial advisors’ activities. If a firm fails to reasonably supervise their advisors, they can sometimes be held responsible for losses sustained by investors.

The claim’s allegations state that the claimant was approached by the Stifel advisor and he was presented with an opportunity to earn 10 percent on a six-month investment. The advisor allegedly recommended a $150,000 Promissory Note investment but did not provide a prospectus or any other offering materials and did not mention he would be investing in “Cardiac Network.” Instead, the adviser allegedly only represented the investment as a Stifel enterprise that was being offered to affluent clients of the firm. The claimant agreed to the investment in the note based on its purported affiliation with Stifel. However, securities arbitration lawyers say that when the note came due, the claimant received no principal payment and the note is now believed to be worthless.

Published on: June 14, 2012

BNI Investors Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Stock fraud lawyers are investigating potential claims on behalf of investors who suffered losses as a result of their investment in BNI Equities LLC, BNI TIC (tenant-in-common) or BNI Notes. In many cases, brokers improperly recommended the purchase of risky real estate and TIC investments offered by BNI. Many brokers were motivated to make these improper recommendations because of the high commission paid to them by real estate private placements. This commission is frequently as high as 10 percent.

BNI Investors Could Recover Losses Through Securities Arbitration

FINRA arbitrations involving real estate investments, such as TICs, are not uncommon. In many cases, securities arbitration lawyers were able to prove that the financial professionals that recommended the investments did not perform the necessary due diligence before they made the recommendation to their clients.

According to stock fraud lawyers, a major problem with structured real estate investments is that they often involve liquidity restrictions and high risks. To make matters worse, these risks are often misrepresented by brokerage firms. Instead, many firms focus on the investments’ promised income streams. Retired investors are often attracted to these income streams but don’t realize that because of the high risks involved, the investment could be unsuitable for them. Financial Industry Regulatory Authority rules have established that 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. Furthermore, brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer.

Published on: June 4, 2012

Possible Securities Arbitration Claims for David Lerner Associates Clients

by InvestorLawyers

In May 2012, the Financial Industry Regulatory Authority ordered David Lerner Associates Inc. to pay claimants Florence Hechtel and Joseph Graziose $24,450 following the return of their Apple REIT Nine shares to the firm. According to securities arbitration lawyers, this could be the first of possibly hundreds of securities arbitration proceedings that are related to David Lerner Associates Inc. and its sale of Apple REITs.

Possible Securities Arbitration Claims for David Lerner Associates Clients

The fourteenth largest non-traded REIT in the United States, Apple REIT Nine is only one of the Apple REIT investments involved in recent arbitration claims. Apple REIT Six, Apple REIT Seven and Apple REIT Eight are also involved in current and potential claims. Since 1992, David Lerner Associates allegedly sold almost $7 billion in Apple REITs, according to FINRA. As a result, stock fraud lawyers believe many more claims could potentially be filed on behalf of David Lerner clients.

With respect to David Lerner’s sales practices of Apple REITs, FINRA launched an investigation in May 2011 and class actions were filed in June 2011 with similar allegations. Recently, David Lerner allegedly changed the way the REITs are valued on account statements, stating that they are “unpriced.” This is the first time it has been acknowledged that the value of the Apple REIT shares may not be the same as what investors paid, according to securities arbitration lawyers. Furthermore, clients who requested a redemption prior to the last quarterly deadline on June 20, 2011 were allegedly informed that only a partial redemption was possible and the only known offer of purchase for Apple REIT shares is allegedly $3 per share, despite the alleged book value of around $7 per share.

Published on: June 1, 2012

Pacific Cornerstone Faces More Problems; FINRA Arbitration Offers Hope for Investors

by InvestorLawyers

Securities arbitration lawyers continue to file claims against Pacific Cornerstone Capital Inc. on behalf of investors. In a February Securities and Exchange Commission filing, Pacific Cornerstone stated that it was “involved with an arbitration proceeding before FINRA and one FINRA investigation.” Pacific Cornerstone did not, however, state any specifics about the investigation referred to in the filing, or in its Focus report, which is the firm’s annual report of audited financials.

Pacific Cornerstone Faces More Problems, FINRA Arbitration Offers Hope for Investors

Pacific Cornerstone is Cornerstone Real Estate Funds’ broker-dealer arm and manager of the devaluated REITs. According to stock fraud lawyers, Pacific Cornerstone’s SEC filing stated that it didn’t know what the results of the FINRA matters would be.

In 2009, Pacific Cornerstone was fined $700,000 by FINRA for allegedly misstating material facts related to private placement sales. Recently, Pacific Cornerstone saw severe devaluations of two non-traded REITs, or real estate investment trusts. Investors received word in March that Cornerstone Core Properties REIT’s value had dropped from $8 per share to $2.25 per share and it raised only $158 million, falling dramatically short of its target of $439 million. Last year, the Cornerstone Healthcare Plus REIT replaced the fund’s adviser and changed its name to Sentio Healthcare Properties Inc. Cornerstone Healthcare’s value has dropped from $10 per share to $9.02 per share. A third Cornerstone offering, CIP Leveraged Advisors, has also seen severe declines in value.

Published on: April 12, 2012

Investors of Odyssey Partnership, BGK Income, Opportunity Fund Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Investment fraud lawyers are investigating certain private placements in potential securities arbitration claims. Two of these private placements are the BGK Income and Opportunity Fund. Allegedly, some of the broker-dealers that recommended these private placement investments could be liable for investor losses.

Investors of Odyssey Partnership, BGK Income and Opportunity Fund Could Recover Losses Through Securities Arbitration

Because of the high commission paid by private placements (often as high as 10 percent), stockbrokers often make improper recommendations in order to earn the commission. If this fraud has occurred, a securities fraud attorney can help investors recover their losses through Financial Industry Regulatory Authority (FINRA) securities arbitration.

Another investment currently being investigated by securities fraud attorneys is the Odyssey Limited Partnership investment. Odyssey Operating Partnership II Ltd. apparently raised $30 million from investors through limited partnership unit sales. In addition, through secured note sales, Odyssey Residential Inc., Odyssey Residential II LLC, Odyssey Property III LLC and Odyssey Diversified VI LLC raised more than $69 million. These partnerships are only appropriate for sophisticated investors and involve substantial risks. Any investment recommendations made to unsophisticated investors could be considered unsuitable.

Published on: February 27, 2012

LPL Financial Investors of Direct Invest LLC May Be Eligible to Recover Losses Through Securities Arbitration

by InvestorLawyers

Investment attorneys are investigating claims on behalf of investors against LPL Financial regarding the sale of private placements. The many investors who sustained losses in private placements, specifically Direct Invest LLC, may be able to recover losses through securities arbitration. Earlier this month, a Financial Industry Regulatory Authority Arbitration Panel awarded two LPL investors $1.4 million as a result of losses they sustained from Direct Invest LLC. Their investments included Braintree Park LLC and Heron Cove LLC. In addition to the $1.4 million award, LPL was also ordered to pay hearing session fees totaling $35,700.

LPL Financial Investors of Direct Invest, LLC may be Eligible to Recover Losses Through Securities Arbitration

According to claimants’ allegations, LPL’s sale of investments in Direct Invest LLC was fraudulent in that the investments were marketed as private placements to retirees, promising that the investments could generate a consistent income stream. Claimants alleged that the sources of the projected distributions, the real estate market and the actual properties were misrepresented by LPL. Furthermore, claimants stated that they were told that their received distributions would come from real estate operations while, in actuality, a large part of the distributions came from the use of leverage or a return of their own investment.

The original FINRA claim also named Meridian Capital Partners LLC and Orchard Securities LLC as respondents. However, the claims against these firms were resolved with claimants prior to the FINRA panel’s ruling. Therefore, details of how the issues were resolved are not present in this case.

Published on: February 9, 2012

Watch List Issued by FINRA

by InvestorLawyers

On January 31, 2012, the Financial Industry Regulatory Authority (FINRA) posted a letter on its website outlining its 2012 priorities for regulation and examination. According to the letter, “FINRA is informing its examination priorities against the economic environment that investors have faced since 2008, as these circumstances have steadily contributed to conditions that foster an increased risk of aggressive yield chasing, inappropriate sales practices, unsuitable product offerings, and misappropriation and fraud.” The letter goes on to state FINRA’s concerns that investors “may be inadvertently taking risks they do not understand or that are inadequately disclosed.”

This is a concern that is shared by investment attorneys as they are faced with client after client that have suffered significant losses as a result of insufficient disclosure or lack of understanding.

Top products on FINRA’s watch list for suitability problems include non-traded real estate investment trusts (REITs), residential and commercial mortgage-backed securities, municipal securities, variable annuities, structured products, exchange-traded funds using synthetic derivatives and significant leverage, life settlements and private placements.