Suitability

Published on: April 12, 2012

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

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: April 9, 2012

Cornerstone Core Properties REIT Investors Could Recover Losses

by InvestorLawyers

According to investment fraud lawyers, investors who sustained significant losses because of their investment in Cornerstone Core Properties REIT may be able to recover losses through Financial Industry Regulatory Authority (FINRA) arbitration. Full-service brokerage firms who sold Cornerstone are now being investigated. Pacific Cornerstone Capital Inc., the sponsor of the Cornerstone REIT, is only one of the firms included in this investigation by securities arbitration lawyers.

Cornerstone Core Properties REIT Investors Could Recover Losses

Investors in the Cornerstone REIT received a letter in March which stated that the share price of their investment had suffered a 72 percent decline, dropping from $8.00 to $2.25. As a result of this decline, significant damages have been suffered by the investors of Cornerstone REIT.

Investment fraud lawyers have stated that as an illiquid, non-traded investment, Cornerstone REIT was not a suitable investment for all investors. FINRA 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: April 6, 2012

Improper Variable Annuity Sales Practices Lead to Fine, Restitution Order by FINRA

by InvestorLawyers

The Financial Industry Regulatory Authority (FINRA) recently fined one of the United States’ largest independent broker-dealers, Cadaret Grant. Grant must pay a $200,000 fine in addition to restitution to investors because of improper sales practices of variable annuities to elderly investors. According to investment fraud lawyers, improper sales of variable annuities are a common cause for securities arbitration claims.

Improper Variable Annuity Sales Practices Lead to Fine, Restitution Order by FINRA

According to investment fraud lawyers, variable annuities are popular investment vehicles for retirement. Essentially, they are insurance contracts that are joined with an investment product. They have insurance-like properties but function as tax-deferred savings vehicles by providing a tax deferral using the insurance policy. The combination of the investment product and insurance contract provides four appealing features: a tax deferral on earnings, the ability to name a beneficiary for the account, the ability to use your life expectancy to receive payments for life and the ability to receive guarantees based on the insurance component. However, variable annuities are also a common vehicle for investment fraud, according to securities arbitration lawyers.

One of the registered representatives for Cadaret Grant sold 13 elderly clients unsuitable death benefit riders to variable annuities from 2006-2008, according to FINRA’s decision announcement. All 13 of the clients were age 77 or older. Apparently, the death benefit was only effective through age 80. Furthermore, despite the fact the death benefit did not apply beyond age 81, it cost the clients 25 additional basis points in fees for the duration of the policy. Apparently, four of the clients could not benefit from the rider in any way.

Published on: April 2, 2012

Investors Could Recover American Investment Exchange Losses

by InvestorLawyers

Investment fraud lawyers are currently representing individuals who suffered losses as a result of their investments in an American Investment Exchange TIC or other real estate co-ownerships investments. In many cases, brokers improperly recommended the purchase of tenant in common investments that were too risky for the investor’s portfolio and/or investment objectives. American Investment Exchange TICs are among these risky investments.

Investors Could Recover American Investment Exchange Losses

TICs, or tenancies-in-common, are investments in which multiple investors are sold a property. These investors are then co-owners of the property, and receive fractional interests in said property. The investors then enjoy their own share of the net income and expenses, proceeds of sale and appreciation of the property.

Because of the high commission paid by co-ownership real estate investments and TICs, stockbrokers often make improper recommendations in order to earn the commission, which is often as high as 10 percent. If this fraud has occurred, a securities arbitration lawyer can help investors recover their losses through Financial Industry Regulatory Authority securities arbitration.

Published on: March 28, 2012

Ziegler Healthcare Real Estate Fund Investors Could Recover Losses

by InvestorLawyers

Investment fraud lawyers are investigating possible Financial Industry Regulatory Authority (FINRA) claims against broker-dealers who improperly recommended the purchase of Ziegler Healthcare Real Estate Funds (ZHREF). ZHREF is one of many risky private equity funds that have been improperly recommended and could result in loss recovery through securities arbitration.

Ziegler Healthcare Real Estate Fund Investors Could Recover Losses

A series of four private equity funds, ZHREF are investments designed to take part in the development and ownership of medical office buildings and other medical facilities. ZHREF I was formed in May 2005, and is fully invested. Its portfolio includes 8 buildings, totaling 221,000 square feet and approximately $54 million. ZHREF II was formed in March 2006, and is fully invested. Its portfolio includes 8 buildings, totaling 340,000 square feet and approximately $76 million. ZHREF III was formed in June 2007, and is fully invested. Its portfolio includes 6 buildings, totaling 133,000 square feet and approximately $34 million. ZHREF IV’s portfolio currently contains two properties. In total, these funds are comprised of 23 properties across 12 states.

A recent investor alert from FINRA addresses how alternative investments such as private equity funds are marketed and sold. Securities fraud attorneys warn investors that brokers often market these investments to clients as safe, despite the risks of private equity funds. Individuals with a conservative portfolio or low risk tolerance may have received unsuitable recommendations from their broker to invest in ZHREF. Individuals who suffered losses as a result of an unsuitable investment may be able to recover losses through securities arbitration.

Published on: March 26, 2012

Shareholders of First Solar Could Recover Losses

by InvestorLawyers

Securities fraud attorneys are investigating possible claims for shareholders of First Solar. First Solar shareholders may have sustained significant investment losses as a result of overconcentration in First Solar stock shares. In July 2008, First Solar shares traded at more than $300 each. However, after a significant decline, First Solar is now trading at around $30 per share. Of course, this roughly 90 percent decline has resulted in significant losses for many shareholders.

Shareholders of First Solar Could Recover Losses

Investment fraud lawyers have long been aware that holding concentrated positions in a single sector or security can result in significant investment losses for high net worth and ultra-high net worth investors. In some cases, client portfolios have been mismanaged and risk management strategies could have protected the investor’s concentrated portfolio. These risk management strategies include protective puts and collars, stop loss and limit orders. These strategies provide accounts with an exit strategy and downside protection in the event that the stock suffers a decline in value, such as what has happened with First Solar. A “zero cost” collar is one example of a hedge strategy. This collar creates a value range maintained by the portfolio, despite the fluctuating of the price of the underlying stock.

A failure to hedge, or to utilize risk management strategies, exposes investors who hold concentrated stock positions to dangerous fluctuations in securities markets. Furthermore, if you are not a high net worth investor, but were recommended an investment only suitable to said investors, your broker made this recommendation unsuitably and you may have a valid securities arbitration claim.

Published on: March 23, 2012

News: FINRA Fines, Enforcement Actions Up in 2011

by InvestorLawyers

According to a new study, in 2011 the Financial Industry Regulatory Authority’s (FINRA) enforcement actions and fines were significantly higher than in 2010. Enforcement actions rose from $45 million in 2010 to $68 million in 2011. Of that $68 million, the largest portion was for improper advertising penalties. Furthermore, the FINRA sanctions survey stated that 1,488 disciplinary actions were filed and 329 brokers were barred by FINRA in 2011 for broker misconduct. Both of these figures saw a rise from 2010.

News: FINRA Fines and Enforcement Actions Up in 2011

A common claim made by securities fraud attorneys for investors occurs when an unsuitable recommendation is made by their broker or financial adviser. Fines for suitability violations more than doubled in 2011, as did the number of cases filed. There were 106 suitability cases filed, with fines amounting to $7.7 million in 2011, compared to 53 cases and $3.75 million in fines in 2010. These fines do not include arbitration awards to investors for losses as a result of suitability violations.

FINRA hopes the new suitability rule will keep pressure on brokers to only offer investments that are in keeping with individual investors’ investment needs, risk appetite and timeline. The new suitability rule is scheduled to be finalized in the summer of 2012. According to Brian Rubin, the former deputy chief counsel of FINRA’s predecessor, the National Association of Securities Dealers, “We anticipate this will continue to be a hot area for FINRA. The new rule gives FINRA additional ammunition.”

Published on: March 22, 2012

Investors of Triple Net TIC Could Recover Losses

by InvestorLawyers

Individuals who suffered significant losses as a result of a Triple Net TIC investment may be able to recover losses through securities arbitration with a securities fraud attorney. In many cases, brokers may have committed broker fraud by unsuitably recommending these investments to investors.

Investors of Triple Net TIC Could Recover Losses

TICs, or tenancies-in-common, are investments in which multiple investors are sold a property. These investors are then co-owners of the property, and receive fractional interests in said property. The investors then enjoy their own share of the net income and expenses, proceeds of sale and appreciation of the property. TIC investors do not participate in the every day management of the property. However, they do have certain rights regarding the property’s management.

TICs offer a relatively high dividend or interest and as a result, these investments are often attractive to certain retired investors. Generally though, TICs are unsuitable for income-seeking and retired investors for two main reasons:

Published on: March 21, 2012

Investors of Guggenheim Shipping ETF Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Investors who suffered losses as a result of their broker’s recommendation of Guggenheim Shipping ETF are seeking the help of investment fraud lawyers in recovering their losses. Guggenheim Shipping ETF is a targeted ETF that tries to track the shipping industry. In general, the shipping industry can be a leveraged play — when there is a strong demand for freight transportation — on the global economy. However, as a result of the decreasing demand for raw materials from emerging markets, the need for shipping services has decreased. Reportedly, the Guggenheim Shipping ETF is down 46 percent, which is bad news for many investors. Luckily, investors who suffered significant losses may have a valid securities arbitration claim.

Investors of Guggenheim Shipping ETF Could Recover Losses Through Securities Arbitration

Brokers, and brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor, to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age. The Financial Industry Regulatory Authority has a dispute resolution form where investors can settle disputes with their brokerage firms relating to unsuitability and other forms of stock broker fraud.

Brokers have been known to sell ETFs and ETNs as conservative ways to track a sector of the market, or the market as a whole. However, complicated trading strategies are necessary to accomplish this, and using these investments to track a sector of the market may or may not be a conservative trading strategy. This depends on the sector of the market and assets in the account relative to the investment’s concentration level.

Published on: March 19, 2012

Investors of Market Vectors Solar Energy ETF Could Recover Losses Through Securities Arbitration

by InvestorLawyers

Because of the attention received by the solar power industry, many brokers and financial advisers recommended the Market Vectors Solar Energy ETF to their clients. However, as a result of budget crises in Europe, subsides that were badly needed to develop solar technology were reduced or eliminated. As a result, technological advancements that would have made solar power economically viable did not materialize as expected. Reportedly, the Market Vectors Solar Energy ETF is down 67 percent, which is bad news for many investors. Luckily, investors who suffered significant losses can consult with a securities fraud attorney to see if they may have a valid securities arbitration claim.

Investors of Market Vectors Solar Energy ETF Could Recover Losses Through Securities Arbitration

Brokers, as well as brokerage firms, have a fiduciary duty to their clients. They must research an investment prior to making a recommendation to an investor in order to establish that the investment is suitable. It must be appropriate for each individual investor, taking into consideration the investor’s investment objectives, investment experience, net worth and age. The Financial Industry Regulatory Authority has a dispute resolution form where investors and their investment fraud lawyers can settle disputes with their brokerage firms relating to unsuitability and other forms of stock broker fraud.

Brokers have been known to sell ETFs and ETNs as conservative ways to track a sector of the market or the market as a whole. However, complicated trading strategies are necessary to accomplish this, and using these investments to track a sector of the market may or may not be a conservative trading strategy. This depends on the sector of the market and assets in the account relative to the investment’s concentration level.