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Published on: January 12, 2018

Investors in Roundstone Healthcare Capital V May Have Arbitration Claims

Money Maze Investors in Roundstone Healthcare Capital V, L.P. (“Roundstone V” or the “Limited Partnership”) may be able to recover losses on their investment through initiating an arbitration proceeding with FINRA Dispute Resolution if the recommendation to purchase Roundstone V was unsuitable or if a broker or investment advisor who sold Roundstone V made a misleading sales presentation.

Roundstone V is structured as a Delaware limited partnership and is based in Acton, MA. The Limited Partnership was formed in 2009 as a capital investment entity, to invest in discounted portfolios of medical receivables. On March 27, 2009, Roundstone V first sold securities through its private placement offering pursuant to Regulation D (“Reg D”) of the federal securities laws.

Investors who participated in the offering were required to invest a minimum of $10,000. Shortly after commencing its initial offering of up to $25,000,000 in investor capital, the Limited Partnership sold $4,459,000 of securities through private placement by May 18, 2009.

Published on: January 11, 2018

FINRA Bars Former Ameriprise Advisor for Alleged Churning of Accounts

by InvestorLawyers

Piggy Bank in a Cage On January 5, 2018, FINRA Enforcement signed off on a Letter of Acceptance, Waiver and Consent (“AWC”) between FINRA and former financial advisor Larry Martin Boggs (“Boggs” or “Respondent”) (CRD# 1582741). Without admitting or denying FINRA’s findings, Mr. Boggs voluntarily consented to an industry bar from associating with any FINRA member firm in any capacity.

Mr. Boggs first became associated with a FINRA member firm in 1986 as a general securities representative. During the course of his career, he worked at a number of brokerage firms, including Ameriprise Financial Services, Inc. (“Ameriprise”) (CRD# 6363) from July 2009 to May 2015. Thereafter, he was associated with Wedbush Securities Inc. (“Wedbush”) (CRD# 877) for less than a year (2015-2016).

In May 2015, Mr. Boggs was discharged from his position by Ameriprise, based on allegations of “violations of company policy related to discretionary trading and suitability.” At around the same time frame, FINRA Enforcement conducted an investigation into Mr. Boggs and his sales practices and handling of customer accounts. FINRA’s findings include the following alleged activities and purported misconduct:

Published on: January 10, 2018

Investors in Business Development Corporation of America May Have Arbitration Claims

by InvestorLawyers

financial charts and stockbroker Investors in Business Development Corporation of America (“BDCA”) may be able to recover losses on their investment through initiating an arbitration proceeding with FINRA Dispute Resolution, if a broker or financial advisor made the recommendation to invest in BDCA without a reasonable basis, or misled the investor as to the nature of the investment. BDCA is a non-traded business development company headquartered in New York, New York. As a business development company (“BDC”), BDCA focuses on providing flexible financing solutions to various middle market companies, including first and second lien secured loans and debt issued by mid-sized companies.

As an investment vehicle, BDCs first emerged in the early 1980’s following legislation passed by Congress making certain amendments to federal securities laws. These legislative changes allowed for BDC’s — types of closed end funds — to make investments in developing companies and firms. Many brokers and financial advisors have recommended BDCs as investment vehicles to their clientele, touting the opportunity for retail investors to earn enhanced dividend income while participating in private-equity-type investing previously unavailable to the average retail investor.

While BDCs may arguably offer an attractive investment opportunity, non-traded BDCs, such as BDCA, are very complex and risky investment products. Non-traded BDCs, as their name implies, do not trade on a national securities exchange, and are therefore illiquid products that are hard to sell (investors can typically only sell their shares through redemption with the issuer, or through a fragmented and illiquid secondary market). Further, non-traded BDCs such as BDCA have high up-front commissions and fees (typically as high as 10%), which are apportioned to the broker, his or her broker-dealer, and the wholesale broker or manager.

Published on: January 9, 2018

Investors in Inland Land Appreciation Fund II May Have Arbitration Claims

by InvestorLawyers

investing in real estate through a limited partnership Investors in Inland Land Appreciation Fund II, L.P. (“Inland II” or the “Limited Partnership) may be able to recover losses on their investment through initiating an arbitration proceeding with FINRA Dispute Resolution. Inland II is based in Oak Brook, IL and is structured as a Delaware Limited Partnership. The Limited Partnership was formed in June 1989, to invest in undeveloped land on an all-cash basis and realize the upside appreciation upon resale. In October 1989, the Partnership commenced an offering of limited partnership units at $1,000 per unit. In connection with this initial offering, Inland II received $50,476,170 in gross offering proceeds, and accepted all unit holders into the partnership. The General Partner is Inland Real Estate Investment Corporation.

Pursuant to their business model, Inland II purchased, on an all-cash basis, 27 parcels of undeveloped land and two buildings. All of these investments were made in the Chicago, IL metropolitan area. Initially, the partnership anticipated holding the properties for a period of 2 -7 years from the time of land portfolio acquisitions. However, due to several factors, including lengthy rezoning and entitlement processes, the Limited Partnership’s holding period greatly exceeded their initial estimates.

According to publicly available documents filed with the Securities and Exchange Commission (“SEC”), as of December 31, 2016, the Limited Partnership had a remaining parcel of land it had yet to sell.

Published on: December 21, 2017

MML Financial Advisor Brian Travers Barred by FINRA

by InvestorLawyers

stock market chart On December 13, 2017, the Financial Industry Regulatory Authority (“FINRA”) disclosed that registered representative Brian Michael Travers has been barred from the securities industry. Specifically, pursuant to a Letter of Acceptance, Waiver, and Consent (“AWC”), pursuant to which Brian Travers neither admitted or denied FINRA’s findings, Mr. Travers acknowledged that on November 1, 2017, he received a written request from FINRA seeking his on-the-record testimony.

FINRA’s request concerned: “[a]n investigation into, among other things, potential undisclosed outside business activities and private securities transactions…” As set forth in the AWC, “By refusing to appear for on-the-record testimony as requested pursuant to FINRA Rule 8210, Travers violates FINRA Rules 8210 and 2010.”

Publicly available information through FINRA indicates that Brian Travers (CRD# 4767891) first entered the securities industry in 2004, and was most recently a registered representative of MML Investors Services, LLC (“MML”) (CRD# 10409) until his former employer terminated his registration in April 2017. Previous to working for MML (2013 – 2017), Mr. Travers was a financial advisor affiliated with Lincoln Financial Advisors Corporation (“Lincoln Financial”) (CRD# 3978). According to FINRA BrokerCheck, Mr. Travers was discharged from his employment with MML on April 4, 2017, in connection with an “[u]ndisclosed outside activity.”

Published on: December 15, 2017

Investors in CNL Lifestyle Properties, Inc. May Have Arbitration Claims

by InvestorLawyers

Apartment Building CNL Lifestyle Properties, Inc. (“CNL Lifestyle”) is a publicly registered non-traded real estate investment trust (“REIT”) that is based in Orlando, FL. Because CNL Lifestyle is registered with the SEC, the non-traded REIT was permitted to sell securities to the investing public at large, including numerous unsophisticated investors who bought shares through the initial public offering (“IPO”) upon the recommendation of a broker or money manager.

Non-traded REITs pose many risks that may not be immediately apparent to investors (or adequately explained by financial advisors and stockbrokers who sell them). To begin, one of the more readily apparent risks associated with non-traded REITs has to do with their high up-front commissions, typically between 7-10%. In addition, non-traded REITs like CNL Lifestyle generally charge investors for certain due diligence and administrative fees, ranging anywhere from 1-3%. These fees act as an immediate ‘drag’ on any investment and can serve to compound losses.

Another significant risk associated with non-traded REITs has to do with their liquidity. Unlike traditional stocks and publicly traded REITs, non-traded REITs do not trade on a national securities exchange. Therefore, many investors in non-traded REITs who were uninformed of their liquidity issues have come to learn that they can only redeem shares of the investment directly with the sponsor (and only then on a limited basis, and often at a disadvantageous price), or alternatively, sell the shares through a limited and fragmented secondary market. Finally, most non-traded REITs are structured to experience a future ‘liquidity event’ – which might entail listing the shares on an exchange or liquidating the entire portfolio – although such an event will typically only occur after a number of years (e.g., 5-7 years).

Published on: December 4, 2017

FINRA Sanctions Morgan Stanley for Failing to Supervise UIT Sales

by InvestorLawyers

Money Maze On September 25, 2017, the Financial Industry Regulatory Authority (“FINRA”) issued a fine of $3.25 million against Morgan Stanley Smith Barney LLC (“Morgan Stanley”) in connection with the brokerage firm’s alleged failure to supervise its brokers’ short-term trades of unit investment trusts. Unit investment trusts (“UITs”) are a specific type of Investment Company, as defined by the Investment Company Act of 1940 (the ’40 Act), and subject to regulation by the SEC. Unlike mutual funds, closed-end funds, or ETFs, UITs are unique in that they are created for a specific, limited time period (e.g., 24 months). Furthermore, UITs consist of a static investment portfolio as part of a pre-selected pooled investment vehicle.

Typically, UITs impose a number of charges. Some of these charges include a deferred sales charge, a creation and development fee, as well as annual operating expenses charged as an annual fee to account for portfolio administration and bookkeeping. In aggregates, these various fees might total approximately 4% for a typical 24-month UIT. Thus, any investor in a UIT will experience a “drag” on the performance of their UIT portfolio in the form of various fees.

Because UITs carry a substantial fee structure and are subject to termination after a given time period, there exists the potential for some financial advisors to recommend to their clients that they roll-over, or switch, from one UIT to another. In its worst form, this sales practice amounts to a stock broker seeking enhanced income through switching clients out of one product to another on a short-term basis in order to earn commissions and fees, at the expense of the client.

Published on: November 20, 2017

Investing in Non-Traded BDCs May Get Even Riskier

by InvestorLawyers

On November 15, 2017, H.R. Bill 4267 (the “Bill”), entitled the Small Business Credit Availability Act (the “Act”), passed the House Financial Services Committee by an overwhelming 58-2 vote. This Bill seeks to amend the Investment Company Act of 1940 (’40 Act), specifically the regulations currently governing business development companies (“BDCs”). In recent years, financial advisors have increasingly recommended BDCs, allowing for Mom and Pop retail investors to participate in private-equity-type investing. Many income-oriented investors are attracted to BDCs because of their characteristic enhanced dividend yield.

As an investment vehicle, BDCs were first made available pursuant to the Small Business Investment Incentive Act of 1980, as a result of a perceived crisis in the capital markets. At that time, small businesses were encountering severe difficulties in accessing credit through traditional means. BDCs are a special type of closed-end fund designed to provide small, growing companies with access to capital.

BDCs are structured as hybrid between an operating company and an investment company under the ’40 Act. Regulated as an investment company, BDCs are required to file periodic reports under the Securities Exchange Act, and further, are subject to a number of regulatory requirements. Three of the most notable regulations currently governing BDCs are as follows:

Published on: November 3, 2017

Investors in HMS Income Fund May be Able to Recover Losses Through Arbitration

by InvestorLawyers

If you have invested in HMS Income Fund (“HMS”) upon the recommendation of your financial advisor, you may be able to recover your losses through arbitration before the Financial Industry Regulatory Authority (“FINRA”). A Maryland corporation formed in 2011, HMS is sponsored by Hines Interests Limited Partnership (“Hines”). HMS is structured as a closed-end management investment company, and pursuant to the Investment Company Act of 1940 operates as a public, non-traded business development company (“BDC”). HMS’s business focuses on providing mezzanine debt and equity financing to various private middle market companies. As of June 30, 2017, HMS has provided debt financing to 119 companies across a spectrum of industries.

As an investment vehicle, BDCs have been available since the early 1980’s (when Congress enacted legislation making certain amendments to federal securities laws allowing for BDC’s to make investments in developing companies and firms). Frequently, financial advisors have recommended BDCs, allowing for Mom and Pop retail investors to participate in private-equity-type investing. Many income-oriented investors are attracted to BDCs because of their characteristic enhanced dividend yield.

Traded BDCs that are listed (and thus sold and resold) on national securities exchanges may offer an attractive investment opportunity (although with enhanced dividend yield comes additional risk). However, non-traded BDCs are altogether different, and should be regarded as risky, complex and illiquid investment products. As their name implies, non-traded BDCs do not trade on a national securities exchange, and are therefore illiquid products that are difficult to sell. Typically, investors can only sell their shares through redemption with the issuer, or through a fragmented and inefficient secondary market. Moreover, non-traded BDCs such as HMS usually have high up-front fees (typically as high as 10%), which are paid to the financial advisor selling the product, his or her broker-dealer, and the wholesale broker or manager.

Published on: October 4, 2017

Investors in Strategic Realty Trust May Have Arbitration Claims

by InvestorLawyers

Strategic Realty Trust (“SRT,” formerly known as TNP Strategic Retail) is a San Mateo, CA based non-traded real estate investment trust (“REIT”) that invests in and manages a portfolio of income-producing real properties including various shopping centers located primarily in the Western United States.

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Market Analyze.

Over the past several years, many retail investors were steered into investing in non-traded REITs such as SRT by their broker or money manager based on the investment’s income-producing potential. Unfortunately, many investors were not informed of the complexities and risks associated with non-traded REITs, including the investment’s high fees and illiquid nature. Currently, investors who wish to sell their shares of SRT may only do so through direct redemption with the issuer or by selling shares on an illiquid secondary market, such as Central Trade & Transfer.