“Non-traded REITs”*are public companies, but their shares are not listed on any stock exchange. This makes non-traded REITs a very opaque and a private market (not to mention illiquid).  Unlike publicly traded REITs, non-traded REITs are illiquid and specify when investors can redeem shares, typically after seven years. At that point, the REIT may go public and begin trading on an exchange — or it may be liquidated.

Unfortunately, many conservative or elderly clients were sold non-traded REITs.  Occasionally, the true risks of these investments allegedly were not disclosed to the clients. Many retirees who couldn’t afford to take the risks associated with non-traded REITs had a substantial percentage of their net worth in these investments. In some instances, they may have been unsuitable investments. Fortunately, some, or all, of the frozen funds or investment losses in non-traded REITs may be recoverable against the brokerage firms who sold them through FINRA arbitration claims and lawsuits. 

We believe that many of the non-traded REITs are far riskier than people knew and were not appropriate for some investors, particularly the elderly, retired or the conservative investors. If you feel these risks were not disclosed  by your broker or the brokerage firms who sold them to you, call a Securities Arbitration Lawyer for a free consultation on how to recover your investment 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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In an April 6, 2011, article for InvestmentNews.com, Bruce Kelly writes that the Financial Industry Regulatory Authority, or FINRA, is prepared to sanction the broker-dealer arm of one of the largest sponsors of non-traded real estate investment trusts for allegedly failing to meet standards for advertising and keeping client information safe.

The Securities and Exchange Commission (SEC) in a filing last Friday, Wells Timberland REIT Inc. said that Finra in March notified its broker-dealer manager, Wells Investment Securities Inc., about its preliminary decision to recommend a disciplinary action against the broker-dealer.

Leo Wells, its founder and chairman, is well known in the independent broker-dealer industry. Wells Real Estate Funds Inc. is one of the largest sponsors of investments in the non-traded REIT industry, with $11 billion in assets and 250,000 investors.

Finra notified Wells Investment Securities in August and said that it had made a preliminary decision to discipline the firm, according to the filing.

According to the InvestmentNews.com article, in its SEC filing, Wells Investment Securities said it “intends to vigorously defend these charges.”

The Wells Timberland REIT had $360 million in assets at the end of last year.

Industry lawyers said there was no way to determine the amount of a likely fine without knowing more details about the matter.

In Kelly’s article, he states that Wells’ REITs are extremely popular with independent broker-dealers, and it has as many as 200 selling agreements with such firms. The Wells Core Office Income REIT Inc. is another product sold by independent broker-dealers.

Nancy Condon, a Finra spokeswoman, had no comment about the matter, and a spokesman for Wells, Terrell McCollum, said he could not comment beyond the contents of the SEC filing.

Kelly goes on to say that Wells has been down this path before. In October 2003, Finra’s precursor, NASD, sanctioned Wells Investment Securities for improperly rewarding broker-dealer reps who sold the company’s REITs. Those rewards included lavish entertainment and travel perquisites. At the time, the regulator also censured Mr. Wells and suspended him from acting in a principal capacity for one year.

If you feel you have been a victim of these alleged fraudulent schemes of  Leo Wells and the Wells’ REITs, 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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Workman’s Security Corporation, a broker-dealer that was a prominent seller of high-risk private placements that wound up going bust has almost wiped the slate clean of costly litigation that could have impaired the firm’s financial condition writes Bruce Kelly of Investmentnews in a February 14, 2011, article.

Workman’s reached an agreement with the Financial Industry Regulatory Authority Inc. this month to pay $700,000 for partial restitution to more than a dozen clients who had sued the firm over investments in Medical Capital Holdings Inc. and Provident Royalties LLC — two series of private placements that the Securities and Exchange Commission charged were fraudulent in 2009.

The Medical Capital and Provident deals were widely distributed by dozens of independent broker-dealers, some of which have shut down because they were unable to face the burden of litigation costs.

“Workman views this as a terrific resolution so it can move forward,” said Benjamin Skjold, partner at Skjold Barthel PA and attorney for Workman, which has 171 reps. The firm has “effectively” paid the $700,000 and now turns to face about a half dozen remaining individual securities arbitration claims from clients.

The insurance carrier for Workman’s, Catlin Specialty Insurance Co., has paid $2.3 million to clients who sued the firm, Mr. Skjold said, adding that the process of settlement and restitution took about a year. “We’ve worked diligently internally, with the insurance carrier and with Finra to get claims resolved,” he said.

Workman’s reps sold a little more than $9 million of Provident Royalties private placements, from last summer in the Northern District of Texas. The amount of Medical Capital notes the firm’s reps sold to investors is not known. According to Workman’s profile on Finra’s BrokerCheck system, the firm’s supervision and due diligence when selling Regulation D private placements had big holes.

“The firm failed to have reasonable grounds to believe that a private placement offered by an entity pursuant to Regulation D was suitable for any customer after the firm received red flags that the entity had financial issues and was not timely making interest payments,” Finra alleged. “The firm failed to enforce a supervisory system reasonably designed to achieve compliance with applicable securities laws and regulation and Finra rules in connection with the sale of the private placement offered by the entity pursuant to Regulation D. The firm failed to conduct adequate due diligence of the private placement offered by the entity pursuant to Regulation D.”

James Shorris, executive vice president and executive director of enforcement with Finra, noted that Regulation D private placements and non-traded real estate investment trusts are listed as the first and second areas of focus for Finra, in a meeting of brokerage executives this month in Phoenix. 

Kelly goes on to say in the Investmentnews article that other broker-dealers have not fared well in settling the gusher of litigation that erupted after the SEC charged Medical Capital and Provident with fraud. On Friday, QA3 Financial Corp., another leading seller of Provident deals, submitted a request with Finra and the SEC to terminate it’s license as a broker-dealer (b-d). QA3 and its insurance carrier, also Catlin, had been sparring in court and exchange lawsuits in the past six months about the amount of coverage owed to the firm.

If you feel you have been a victim of the alleged broker-dealer private placement fraudulent schemes of   Workman’s Securities Corp.,or any other broker-dealer, 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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Yesterday, Bruce Kelly’s article from InvestmentNews stated that National Securities Corp. is the latest broker-dealer to face disciplinary action from Finra over the sale of private placements gone bust.

According to National Securities’ profile on Finra’s BrokerCheck system, the firm received a Wells notice last month from the Financial Industry Regulatory Authority Inc. A Wells notice indicates that the regulator intends to bring an enforcement action against an individual or a firm.

Kelly goes on to say that National Securities reps sold investors about $3.7 million of notes issued by Provident Royalties LLC, according to the latter’s bankruptcy court filings. The Regulation D offering from Provident involved a series of oil and gas private placements that the Securities and Exchange Commission in 2009 claimed were fraudulent,Mark Roth, the firm’s general counsel for National Holdings Corp., the parent of National Securities, did not return phone calls Tuesday seeking comment.

In the Investment News article they say that National Securities received the Wells notice regarding violations of product suitability rules, e-mail supervision rules, and standards of commercial honor and principles-of-trade rules, according to the BrokerCheck report. The product mentioned in the report was a “private placement.”

The Finra officials have made broker-dealers’ sale of private placements that failed during the market collapse their No. 1 enforcement priority this year.

Broker-dealers have begun to feel the pinch. Workman Securities Corp. this month reached an agreement with Finra to pay $700,000 for partial restitution to more than a dozen clients who had sued the firm over investments in Medical Capital Holdings Inc. and Provident Royalties. Like Provident, the SEC charged Medical Capital with fraud in 2009.

In a meeting of brokerage executives this month in Phoenix, James Shorris, executive vice president and executive director of enforcement with Finra, said Reg D private placements and non-traded real estate investment trusts are listed as the first and second areas of focus for Finra, respectively.

If you feel you have been a victim of the alleged broker-dealer private placement fraudulent schemes of  the brokerages listed above , National Securities Corp., Medical Capital Holdings, Workman’s Securities Corp.,or Provident Royalties,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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