Suitability

Published on: June 4, 2012

Possible Securities Arbitration Claims for David Lerner Associates Clients

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: May 30, 2012

Healthcare Trust of America Investors Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are investigating potential claims on behalf of investors who purchased the Healthcare Trust of America REIT and suffered significant losses as a result of their investment. In many cases, brokers improperly recommended the purchase of Healthcare Trust of America to investors for which the REIT was unsuitable, and marketed it as safe and secure despite its risky nature.

Healthcare Trust of America Investors Could Recover Losses

Healthcare Trust of America is a non-traded Real Estate Investment Trust (REIT). According to stock fraud lawyers, REITs typically carry a high commission which motivates brokers to make the recommendation to their clients despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs, like Healthcare Trust of America, carry a relatively high dividend or high interest, making them attractive to investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors.

Healthcare Trust of America is, according to its website, a “fully integrated, self-administered, self-managed real estate investment trust.” The REIT has invested around $2.5 billion, since it was formed in 2006, in real estate projects. According to a recent SEC filing, the REIT is seeking a $10.10 per share IPO price. However, it is possible that Healthcare Trust of America’s initial IPO share price will be lower than that, in light of what recently happened with Inland Western REIT’s IPO, in which the actual share price was considerably lower than the anticipated share price.

Published on: May 28, 2012

A & O Fraud Scheme Targets Retired Individuals; Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are investigating claims on behalf of A & O Resource Management investors. A & O Resource Management and other affiliated companies, such as A & O Life Settlements, were used in a fraud scheme that resulted in lengthy prison sentences for two of the principals involved in the fraud. Many investors suffered significant losses as a result of the scheme. Some losses have already been recovered for defrauded investors, but there are still many victims that could recover losses through securities arbitration.

A & O Fraud Scheme Targets Retired Individuals, Investors Could Recover Losses

According to securities arbitration lawyers, A & O marketed bonds that were sold as fixed-maturity investments. Furthermore, investors who purchased the bonds were guaranteed annual returns at a minimum of 10 or 12 percent. The scheme claimed the investments were safe and had been designed to grow retirement assets. However, the targets of the fraud, retired and older individuals, were not made aware of the risks associated with the bonds.

While direct claims against A & O cannot be made easily because the company is currently in receivership, investors who purchased the products through a broker may be able to hold that broker responsible if he or she did not adequately explain the investment’s risks. According to investment fraud lawyers, prior to recommending an investment to a client, brokers and firms are required to perform the necessary due diligence to establish whether or not the investment is suitable for the client given their age, investment objectives and risk tolerance. This investment was clearly unsuitable for many of the investors who received the recommendation to purchase the bond.

Published on: May 25, 2012

TVIX ETF Investors Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are investigating claims on behalf of investors who suffered losses as a result of their investment in the TVIX ETF. It is possible that brokerage firms who recommended this high-risk, complicated product could be held liable for their clients’ losses.

TVIX ETF Investors Could Recover Losses

Traditional, conservative ETFs have become very popular and, as a result, some unsophisticated investors may have invested in the very risky TVIX ETF, believing it to be a traditional ETF. However, TVIX, the VelocityShares Daily 2x VIX Short-Term ETN, is linked to an index that is made up of front month futures and offers leveraged exposure to VIX contracts.

The total share price of TVIX went down 29.3 percent on March 22, 2012. Following this drop, investors frantically sold off their positions and the next trading day saw 29.8 percent losses. At that time, TVIX was trading at $7.16 per share, a dramatic decline from the closing price before the initial drop, which was $14.43 per share. After closing on the second day, net losses amounted to a little over 50 percent. According to securities fraud attorneys, many investors suffered significant losses in a matter of hours.

Published on: May 23, 2012

Securities Arbitration Claims Could Help Inland Western Investors Recover Losses

by InvestorLawyers

Securities fraud attorneys are continuing to file claims on behalf of investors who suffered losses as a result of their investments with Inland Western REIT. Inland Western, which is now known as Retail Properties of America Inc., is the third-largest shopping center REIT in the nation.

Securities Arbitration Claims Could Help Inland Western Investors Recover Losses

Inland Western’s recent IPO offering resulted in some disastrous effects on investors. Recent reports indicate that Inland Western’s $8 offering price was the result of reverse-stock-split engineering. This price is significantly less than the expected pre-offering price, which was $10 to $12. In actuality, investors who paid $10 per share for the REIT originally are receiving a split-adjusted value of only $3 per share. This 70 percent decline could result in staggering losses. However, it may be possible for investors to recover their losses through FINRA securities arbitration.

Inland Western is a non-traded Real Estate Investment Trust (REIT). According to stock fraud lawyers, REITs typically carry a high commission which motivates some brokers to make the recommendation to their clients despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs, like Inland Western, carry a relatively high dividend or high interest, making them attractive to investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors.

Published on: May 21, 2012

Inland American REIT Under SEC Investigation; Investors Could Recover Losses in Securities Arbitration

by InvestorLawyers

Securities arbitration lawyers are currently investigating possible claims on behalf of investors who suffered losses as a result of their purchases of Inland American Real Estate Trust Inc. through a full-service brokerage firm. Inland American is the largest non-traded REIT in the industry. Recently, it has been reported that Inland American is under investigation by the U.S. Securities and Exchange Commission (SEC). The SEC is investigating whether there were violations of federal securities laws regarding Inland American’s fees and administration.

Inland America REIT Under SEC Investigation, Investors Could Recover Losses in Securities Arbitration

Inland American’s quarterly report stated that the company “has learned that the SEC is conducting a nonpublic, formal fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws.” The potential violations mentioned in the report pertain to “the business manager fees, property management fees, transactions with affiliates, timing and amount of distributions paid to investors, determination of property impairments, and any decision regarding whether the company might become a self-administered REIT.”

As a public non-traded REIT, sales of Inland American may have carried 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 Inland American, carry a relatively high dividend or high interest, making them attractive to investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors, according to stock fraud lawyers.

Published on: May 16, 2012

Investors Could Recover Losses from Inverse ETF, ETN Investments

by InvestorLawyers

ETFs (exchange traded funds) and ETNs (exchange traded notes) have recently gained a significant amount of attention in the securities industry. Securities fraud attorneys have been filing arbitration claims on behalf of investors who were unsuitably recommended ETFs or ETNs and suffered significant losses as a result. The Financial Industry Regulatory Authority (FINRA) has started to increase its efforts in regulating inverse ETFs and ETNs, hoping to ensure that unsophisticated investors are not being sold these complicated products.

Investors Could Recover Losses from their Inverse ETF and ETN Investments

In connection with FINRA’s efforts, UBS Financial Services, Morgan Stanley, Wells Fargo and Citigroup Global Markets Inc. have agreed to pay $7.3 million in fines and $1.8 million in restitution, totaling $9.1 million. This will settle allegations that they sold inverse and leveraged ETFs to clients for which the investment was unsuitable. According to FINRA, these four firms did not have a “reasonable basis” for the recommendation of the securities to certain clients and also failed to provide adequate supervision. For more than a year, from January 2008 through June 2009, $27 billion in inverse ETFs were bought and sold by the firms.

With ETFs and ETNs now being recognized as a significant problem, we are likely to see more sanctions leveled by FINRA. According to stock fraud lawyers, the SEC ceased approving applications for ETFs in March 2010, when those ETFs used derivatives. Furthermore, the SEC indicated that it wanted to determine if leveraged and inverse ETFs warranted additional investor protection. There is concern, from both FINRA and the SEC, that inverse and leveraged ETFs are being confused with traditional, less risky ETFs.

Published on: May 14, 2012

The Problem with Non-traded REITs

by InvestorLawyers

Lately, there has been a lot of buzz amongst securities arbitration lawyers about non-traded REITs. Investors who have suffered losses as a result of these investments have been encouraged to come forward to attempt to recover their losses through FINRA arbitration. But what exactly is the problem with these investments?

The Problem with Non-Traded REITs

Generally, a problem with these investments arises when a financial advisor fails to adequately disclose to the customer the risks and illiquidity of the investment. Often, the motivation for the broker/adviser’s failure to disclose when recommending the product is the high commission he or she will earn on the investment.

Valuation problems of these investments are another major issue with non-traded REITs, according to investment fraud lawyers. Currently, FINRA rules only mandate that the sponsors of the investments establish an estimated per-share valuation no longer than 18 months after the investment stops raising investor funds. This is an issue because fund raising can, and often does, last for years. As a result, the per-share valuation can go for years without being updated. Furthermore, there is an obvious conflict of interest when it is the non-traded REIT’s sponsor that establishes the valuation.

Published on: May 10, 2012

Investors of Lehman Return Optimization Security Note, Maluhia Eight Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Securities arbitration lawyers are currently investigating potential claims on behalf of investors who suffered losses as a result of their investments in Lehman Return Optimization Security Note and Maluhia Eight LLC.

Investors of Lehman Return Optimization Security Note, Maluhia Eight Could Recover Losses Through Securities Arbitration

Lehman Return Optimization Security Notes were allegedly marketed by brokers as investments designed to guarantee safety much like the safety associated with “capital preservation.” Furthermore, they were marketed as “low-risk investment,” according to investment fraud lawyers. However, the investment’s safety was actually dependent upon the solvency of Lehman Brothers, which acted as the issuer of the note. Following Lehman Brother’s September 2008 declaration of bankruptcy, investments such as this one that were backed by Lehman Brothers suffered disastrous losses. The potential liability of brokerage firms that sold the note to investors is now being investigated.

Brokerage firm liability for a Hawaii real estate deal, Maluhia Eight LLC, is also under investigation by securities arbitration lawyers. Chapter 11 bankruptcy was declared by Maluhia Eight in 2010 in the Northern District of Texas. Many investors have suffered losses as a result of the declaration of bankruptcy, but investors who purchased Maluhia Eight because of an unsuitable recommendation may be able to recover losses.