Investor Lawyers Blog
According to securities arbitration lawyers, investors who suffered significant losses as a result of their losses in the KBS REIT still may recover those losses through securities arbitration following the withdrawal of a class action against KBS REIT. Plaintiff George Steward led investors in suing KBS REIT in May. Allegations stated that misrepresentations about the REIT were made by KBS. These alleged misrepresentations included the dividend payment policy, investment objects and the REIT’s investments value. Reportedly, a voluntary dismissal was filed by the plaintiffs in the U.S. District Court in Fort Myers, Florida last month.
In March, KBS REIT I investors were notified that the investment’s value would drop from $7.32 to $5.16 per share, representing a 29 percent decline in value. The investment’s offering price was $10 per share. Furthermore, KBS also stated it would cease distributions to investors. An investor presentation filed with the SEC in March stated that KBS REIT I raised $1.7 billion in equity during its initial offering. The investment holds loans and other debt of $2.3 billion and property assets of $3.4 billion.
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. Non-traded REITs are illiquid and inherently risky and, therefore, not suitable for many investors. According to securities fraud attorneys, because of the high-commissions these investments generally offer, many brokers make unsuitable recommendations of REITs to investors. Based on information now known about KBS REIT, many of the firms that sold this investment will be unable to prove the adequate due diligence was performed before recommending this product to investors.