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Feb/13

7

Tenant-In-Common (TIC) Investments

Comments off · Posted by admin in FINRA

Tenant-in-Common (TIC) investments, or 1031 exchanges, are a form of real estate ownership in which multiple investors own fractional interests in a property. Many brokers and brokerage firms sold billions of these products to investors across the country allegedly charging high fees, and doing little or no due diligence. They were investments with high risk and highly illiquid, often not suitable for certain investors’ portfolios. Due to the high interest or dividend offered by TICs, the retired investor is often more attracted to these products.  TICs are generally unsuitable for the retired or income seeking investors with conservative portfolios.  TICs are risky because they are dependent on the performance of the underlying real estate properties and the real estate market.

TICs generally pay a high commission – as much as 10%, which gives the stockbroker motivation in recommending the TICs to their investors.

Recently, a FINRA Arbitration Panel ordered LPL Financial to pay two investors $1.4 million for losses sustained in these two TIC exchanges: Heron Cove, LLC and Braintree Park, LLC. The sponsor of the two deals was Direct Invest, LLC. LPL was also held responsible for $35,700 in hearing session fees.

Securities Lawyer, Lars Soreide, points out that, “One of the errors investors make in TIC cases is to assume that the unit value of the investment equals the property value divided by the units.” When TIC cases are litigated, “many of these cases bog down in property valuation when in reality the issue in not the property value but the investment value, which is next to worthless even if the property has residual value. Think of this way, who would buy a unit in this investment given that the purchaser would have to take on 150% on additional debt, give up all property rights to become a tenant in common that is worthless as collateral and cannot be turned into cash? Given the structure of ownership with loans with covenants signed by the sponsor and cross collateralized usually, property value is secondary in these cases.” Often these investments are sold by a stock broker or financial adviser because a Tenant-in-Common Investment is a security. In a FINRA arbitration, “often Respondents/Defendants put on an appraiser to prove the property value, but there is an objection on relevance of this testimony because the appraiser does not opine on the market value of the security on the notional value of the unit which is usually not much at all if anything,” says Soreide. It is “critical to obtain the principal loan documents and assumption agreements to ascertain how encumbered and how much real estate you actually own.”

Soreide Law Group, PLLC,  represents investors nationwide in Tenant-In-Common (TIC) cases before the Financial Industry Regulatory Authority. For a free consultation on how to potentially recover your financial losses call: 888-760-6552. More information on TICs and FINRA Arbitrations can be found on http://www.securitieslawyer.com.

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Jun/11

15

Pricing Gap Revealed in Apple REIT Eight

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David Kelly of InvestmentNews.com, June 15, 2011, writes that the price of one in a series of 10 nontraded REITs sold exclusively through David Lerner Associates Inc. took a hit yesterday when management from Apple REIT Eight Inc. said that its book value was $7.57 per share at the end of March, according to a filing with the Securities and Exchange Commission. That’s in contrast to the $11-per-share price that Apple REIT Eight posted last week in a separate SEC filing and had consistently listed as an estimated share price on client account statements.

With about 370 registered reps, David Lerner Associates, has been on the hot seat over pricing of the Apple REITs since the end of May, when the Financial Industry Regulatory Authority Inc. filed a complaint against the firm in which it voiced concern over the fact that it had marketed shares in Apple REITS that hadn’t been re-priced in years. Finra said in the complaint that it was misleading to investors not to reflect the updated value of the REITs on the David Lerner Associates website, especially in those cases where the REITs were paying dividends with principal and borrowed funds instead of operating income. David Lerner Associates allegedly violated Finra suitability rules selling the Apple REITs, according to the complaint, and could face Finra fines and potentially pay restitution to clients.

David Lerner Associates has been the sole underwriter and distributor of the 10 REITs since 1992, most of them dubbed Apple REITs, that have issued $6.8 billion in securities, according to the Finra complaint. Investors have been attracted to the REITs’ steady dividends of 7% to 8%.

Apple REIT Eight took the step to restate its value in order to recommend to the owners of the REIT not to sell shares in response to a $3 tender offer by a series of pooled investment funds managed by Mackenzie Patterson Fuller LP, which buys illiquid real estate investments at deep discounts according to yesterday’s filing with the SEC.

“The board of directors believes that the offer price represents an opportunistic attempt by the bidders to purchase units at an unreasonably low price and as a result, deprive the stockholders who tender the units of the potential opportunity to realize the long-term value of their investment in the company,” the company said in the filing.

Kelly writes, adding to the confusion over the value of Apple REIT shares, David Lerner client account statements report an estimated value of $11 per share, said a plaintiff’s lawyer in New York. He said that he had spoken with about two dozen David Lerner investors, but had so far not filed any complaints against the firm.

An SEC filing on Apple REIT Ten Inc. yesterday stated that a member of the board of directors, Ronald Rosenfeld, resigned earlier this month. The board plans to fill his seat at a later date.

The InvestmentNew.com article goes on to say that accurate pricing of shares of the illiquid, long-term nontraded REITs has been an issue for almost two years. Before 2009, the common practice in the brokerage industry was to list the share price on client account statements at par value, or the amount at which the broker-dealer sold it, with the product typically priced at $10 or $11 a share.

Finra told broker-dealers that they needed to adjust the prices on the investments more frequently in 2009. In a notice to members, Finra said that it was prohibiting broker-dealers from using information that was more than 18 months old to estimate the value of a nontraded REIT.

If you or a family member have become a victim of the sale of Apple REITs by David Lerner Associates, Inc., call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Apr/11

8

FINRA Fines and Suspends Eric Damien Kallies

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The following was obtained on FINRA’s website:

Eric Damien Kallies (CRD #4753714, Registered Representative, Waunakee, Wisconsin)

submitted a Letter of Acceptance, Waiver and Consent in which he was fined $15,000 and suspended from association with any FINRA member in any capacity for 30 business days. The fine must be paid either immediately upon Kallie’s reassociation with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Kallies consented to the described sanctions and to the entry of findings that he executed purchases of exchange-traded fund (ETFs) in a managed joint account of public customers without the customers’ knowledge or consent, and without having obtained the customers’ prior written authorization to exercise discretion and his firm’s prior written acceptance of the account as discretionary. The findings stated that Kallies made a presentation consisting of several slides to the customers in connection with an investment strategy program he was recommending and was considered “sales literature.” 

The findings also stated that Kallies made the presentation without first obtaining approval from the appropriate registered principal of the firm, and it was never filed with FINRA within 10 business days of its first use. The findings also included that the presentation generally failed to disclose the risks of investing in the securities that were discussed, failed to disclose the general risks associated with investing in mutual funds and ETFs, and failed to disclose the heightened risk of investing in inverse types of ETFs.

FINRA found that the absence of certain disclosures resulted in the presentation not being fair and balanced and not providing the investor with a sound basis for evaluating facts in regard to a particular security or service, and the slides contained unwarranted and/or misleading information. FINRA also found that charts in some slides failed to include the total annual fund operating expense ratio, a prospectus offer and standardized average annual total returns for one, five and ten years; rather, they included the annualized rates of return, which is considered non-standardized performance and must be accompanied by the standardized performance listed. In addition, FINRA determined that the charts in some slides failed to include the performance disclosures required by SEC Rule 482(b)(3); these disclosures generally require that the sales material disclose that the performance data quoted represents past performance, that past performance does not guarantee future results and that performance may be lower or higher.

The suspension is in effect from February 7, 2011, through March 21, 2011. 

(FINRA Case #2009016654401)

If you feel you have been a victim of these alleged fraudulent schemes of  Eric Damien Kallies, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

 

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Apr/11

4

Are You Invested in Real Estate Equity or Mortgage Projects Funds?

Comments off · Posted by admin in FINRA

Soreide Law Group, PLLC,  is currently investigating alleged claims against a number of the following Real Estate Equity/Mortgage Projects/Funds.  If you feel you have lost money with any of the following funds, please call us, without cost to you, and set up a consultation with a lawyer to pursue your claims.

 Real Estate Equity/Mortgage Projects/Funds –

Bluerock Special Opportunity & Income Fund

Cawley Partners Land Fund I

Cottonwood Capital Development Debenture Program

GHC US Gov’t Subsidized Housing Fund

GK Development/Retail Property Fund

NetREIT $50,000,000 Common Stock Offering

Redstone Land Interest No. 1, LLC Program Review

Sovereign Capital Thoroughbred Single Tenant Asset Fund

Summit CRA Multi-Family Housing Fund I, LLC

Summit CRA Multi-Family Fund II

United Development Funding III

Welsh Midwest Real Estate Fund IV

Western America – American Healthcare Properties 2007 Fund

If you have been an alleged victim of  these or any other real estate equity or mortgage projects funds, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Mar/11

31

E*Trade to pay $25,000 settlement to North Carolina Investors

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In the CharlotObserver.com article written by David Bracken, he writes that E*Trade Securities will pay a $25,000 civil penalty under a settlement reached with the state over auction rate securities it sold to North Carolina investors.

In the past, auction rate securities were often marketed to investors as short-term investments that could easily be sold for cash on short notice. But market for the products disappeared in early 2008, leaving investors trapped holding products that could not be resold.

Bracken writes that the settlement, announced by the Secretary of State’s Office today, required E*Trade to show the state that it had made investors “whole,” meaning they had reached some form of satisfactory deal with them. E*Trade will also reimburse the state $400,000 for investigation costs related to the case.

When the markets froze, E*Trade had at least 47 North Carolina investors holding roughly $8,375,000 in ARS products.

In the article the state said its investigation had found that E*Trade regularly represented ARS products to customers as safe investments suitable for short-term cash management purposes.

It found that salesmen had not been properly trained by the company to sell the products and had failed to consistently failed to disclose the risk that, if the auctions failed, clients would not be able to sell their auction rate securities and could be stuck with illiquid investments.

“This is the first case in the country where E*Trade has signed a settlement concerning its role in selling auction rate securities to misled investors,” Secretary of State Elaine F. Marshall said today in a release. “We are incredibly pleased to be the first state where we were able to make sure the investors have been made whole, where a fine has been levied, and where the bad practices used have been made public.

The settlement, announced by the Secretary of State’s Office, required E*Trade to show the state that it had made investors “whole,” meaning they had reached some form of satisfactory deal with them.

If you feel you have also been an alleged victim of  E*Trade Securities, please call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Mar/11

22

SII Investments and Santa Barbara’s Villa Rose Subordinate Notes

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SII Investments, Inc. operates as a broker/dealer. It offers its services through representatives. The company was formerly known as Secura Investments, Inc. and changed its name to SII Investments, Inc. in June, 1997. SII Investments, Inc. began in 1968 when Secura Insurance Company added a securities channel to its existing business. Secura Investments, Inc., gave property and casualty insurance agents the flexibility to sell securities to their clients.The company is headquartered in Appleton, Wisconsin. SII Investments, Inc. operates as a subsidiary Jackson National Life Insurance Company.

 In 1990 Secura Investments, Inc. was repositioned as an independent broker/dealer. In June of 1997, two of Secura’s brokers and one employee of the broker/dealer purchased Secura Investments, Inc. from Secura Insurance Company and changed the name to SII Investments, Inc. One year later, Jackson National Life Insurance Company acquired SII Investments. The network resources available from this new parent company enabled SII to bring new technology and expanded offerings to representatives and clients.

Additional Information:

SII Investments, Inc. Ordered to Pay Customer $105,000
A FINRA arbitration panel ordered SII Investments to pay an investor $105,000 to compensate him for damages that he suffered as a result of SII Investment’s alledged misconduct. The investor accused SII Investments of negligence, failure to supervise, and violation of Florida’s investor protection statute in relation to recommendations and sales of American Skandia variable annuities.

It has come to our attention that there have been some alleged bad investments made through subordinate notes, in a retirement community called ”Santa Barbara Villa Rose, LLC”  which were purchased through SII Investments.  We are currently investigating those claims.

If you feel you have been an alleged victim of a fraudulent investment by SII Investments, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority

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Mar/11

7

Life Settlements Should be Defined as ‘Securities’

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In an article from InvestmentNews, Darla Mercado writes that an SEC task force recommended that life settlements be defined as ‘securities,’ thus making such transactions subject to federal securities laws.

The article states that bringing life settlements under the definition of security would require market intermediaries, including settlement brokers and providers, to register with the Securities and Exchange Commission and the Financial Industry Regulatory Authority Inc., according to a report by the task force.

This task force, which has been studying the issue since September, found that while there are two regulatory frameworks addressing life settlements — one from the National Association of Insurance Commissioners and the other from the National Conference of Insurance Legislators — there are numerous variations in how the states actually adopt those rules.

Forty-eight states treat life settlements as securities under state laws, but some states exclude the original sale from the insured person or the sale from the policy owner to the provider.

The Financial Industry Regulatory Authority or “Finra,” currently oversees life settlements involving variable life insurance, but federal courts have reached different conclusions as to whether fractional interests in life settlements are indeed securities, according to the SEC report.

The article goes on to say that the task force recommended that SEC staff members ensure that settlement brokers and providers are sticking to legal standards of conduct, and that the staff watches for the development of a life settlement securitization market. Thus far, no securitizations have been registered with the SEC and offered to the public.

The task force also called upon Congress and state legislators to weigh applying stronger regulation to life expectancy underwriters and asked the SEC to consider issuing an investor bulletin on investments in life settlements. Another report released by the Government Accountability Office also criticized the patchwork of life settlement regulation in the states. Disclosure requirements can vary across jurisdictions, and policy owners could sell their policy without knowing whether they received a fair price or how much their brokers made, the GAO said.

Inconsistent laws have also hampered industry participants, as some brokers and providers have had to deal with the cost of complying with different rules in multiple states, the GAO said. The organization called for consistent legal protection for similar products and services, including disclosures, sales practice standards and suitability requirements.

Call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority

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Feb/11

24

Principal Protected Notes Fail To Live Up To Their Hype

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The complex securities sold as 100% principal protected notes have failed to live up to their hype. Recently, numbers of investors have witnessed billions of dollars in losses because of so-called investments that were touted by brokers as good as cash investments.

A New York Times article by Gretchen Morgenson, highlights the questions surrounding 100% principal protected notes and how these complex securities became the darling of Wall Street and a disaster for many investors.

Principal protected notes are essentially zero-coupon notes whose return is partly tied to the performance of an equity index, such as the Standard & Poor’s 500 or the Russell 2000. How an investor makes money on these types of investments, however, is a complex process. The securities promise to return an investor’s principal, typically at the end of 18 months, along with the added gain from the index’s performance if that index trades within a certain range.

For an investor with one of these notes to earn the return of the index, as well as get his principal back, the index cannot fall 25.5% or more from its level at the date of issuance. The index also cannot rise more than 27.5% above that level. If the index exceeds those levels during the holding period, an investor would receive only his principal back.

The New York Times article points out, 100% principal protected notes were sold by many brokerages to conservative investors who typically put their money in low-risk financial products like certificates of deposit. Many investors quickly became disenchanted with their decision to buy into principal protected notes, especially those who bought notes issued by Lehman Brothers Holdings. Those investments are now worth mere pennies on the dollar following the company’s bankruptcy filing in September 2008.

The article lists two investors who lost big on 100% principal protected notes with Lehman were Corinne and Gregory Minasian, according to the New York Times. On the suggestion of their UBS broker they invested almost $100,000 – more than half of their savings – into Lehman notes in early 2008. They ultimately lost everything, and currently have an arbitration case pending in an attempt to recover their losses.

The Minasians contend their UBS broker failed to explain the risks in the securities, and never provided them with a prospectus. They contend they didn’t’ even know their investment had been issued by Lehman Brothers until the firm actually collapsed in 2008.

“I am not a sophisticated investor,” said Mr. Minasian in the NYT’s article. “Many years ago I dabbled in the stock market, but I learned my lessons. Over the past 10 to 15 years my wife and I invested in CDs.”

UBS sold $1 billion of these notes to investors. Commissions were 1.75%, a percentage that is far higher than those generated on sales of CDs. When Mr. Minasian asked about the commission, he says his broker said none existed.

Did your broker or financial advisor sell you 100% Principal Prtected Notes and tell you it was safe and secure? If so, you may have a claim against your broker and the brokerage firm for your losses. Call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority

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Feb/11

9

FINRA Sanctions Paul Edward Burkemper, St. Louis, Missouri

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Paul Edward Burkemper (CRD # 2222925, Registered Principal, St. Louis, Missouri) submitted a Letter of Acceptance, Waiver and Consent in which he was barred from association with any FINRA member in any capacity. Without admitting or denying the findings, Burkemper consented to the described sanction and to the entry of findings that he engaged in private securities transactions when he sold $1,898,975 in ownership interests of an entity to individuals, who included his member firm’s customers. The findings stated that Burkemper sold the ownership interests without providing written notice to the firm of these sales and without receiving the firm’s written approval or acknowledgement for these sales.

This information was obtained from FINRA’s website.

If you feel you have been a victim of these alleged fraudulent schemes of  Paul Edward Burkemper, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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Feb/11

9

Robin Fran Bush, Coral Springs, FL, Suspended and Fined by FINRA

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Robin Fran Bush (CRD # 1994431, Registered Principal, Coral Springs, Florida) submitted a Letter of Acceptance, Waiver and Consent in which she was fined $10,000, suspended from association with any FINRA member in any principal capacity for one year and required to complete eight hours of AML training prior to reassociation with a member firm or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. Without admitting or denying the findings, Bush consented to the described sanctions and to the entry of findings that acting in her capacity as her member firm’s AMLCO, she failed to implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions under 31 USC 5318(g) and implementing regulations thereunder. The findings stated that Bush failed to ensure her firm’s overall compliance with NASD Rule 3011 by detecting and investigating suspicious activities or other activities in which red flags of money laundering were present and, when appropriate, filing SARs. The findings also stated that as her firm’s CCO, Bush failed to adequately supervise firm AMLCOs and ensure they were performing their functions pursuant to the firm’s AML program and written procedures, and failed to ensure they were properly investigating suspicious activities, recommending and filing SARs or documenting the rationale for concluding that a SAR was unnecessary. The findings also included that Bush failed to adequately supervise the firm’s DSCO to ensure he was taking adequate investigative steps to ascertain whether certain customer transactions were part of a manipulative or fraudulent scheme, conducting adequate criminal or securities disciplinary background checks, and conducting adequate due diligence to ascertain whether customers engaging in significant designated securities transactions had any affiliations with the issuers; in fact, many customers had criminal or securities disciplinary backgrounds or had close ties to issuers whose shares they were trading. FINRA found that as her firm’s CCO, Bush failed to ensure her firm reported, and timely reported, customer complaints to FINRA. FINRA also found that Bush failed to ensure her firm filed, and timely filed, Forms U4 and U5 with FINRA to report disclosable events.

This information was obtained from FINRA’s website.

If you feel you have been a victim of these alleged fraudulent schemes of  Robin Fran Bush, call a Securities Arbitration Lawyer for a free consultation on how to recover your losses.  To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA  the Financial Industry Regulatory Authority.

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