Securities Fraud Blog | Find out if your broker is liable for your losses

TAG | REITs

Jun/11

7

David Lerner & Associates Charged By FINRA With Soliciting Investors to Purchase REITs Without Fully Investigating Suitability

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WASHINGTON — On FINRA’s website, The Financial Industry Regulatory Authority (FINRA) announced May31,2011, that it has filed a complaint against David Lerner & Associates, Inc. (DLA), of Syosset, NY, charging the firm with soliciting investors to purchase shares in Apple REIT Ten, a non-traded $2 billion Real Estate Investment Trust (REIT), without conducting a reasonable investigation to determine whether it was suitable for investors, and with providing misleading information on its website regarding Apple REIT Ten distributions. DLA has sold and continues to sell Apple REIT Ten targeting unsophisticated and elderly customers with unsuitable sales of the illiquid security.

FINRA’s complaint goes on to say that since January 2011, as sole underwriter for Apple REIT Ten, DLA has sold over $300 million of an open $2 billion offering of the REIT’s shares. Apple REIT Ten invests in the same extended stay hotel properties as a series of other Apple REITs closed to investors. Apple REIT Ten and the closed Apple REITs were founded by the same individual, and are all under common management. DLA has been the sole underwriter for Apple REITs since 1992, selling nearly $6.8 billion of the securities into approximately 122,600 DLA customer accounts. DLA earns 10 percent of all offerings of Apple REIT securities as well as other fees. Apple REIT sales have generated $600 million for DLA, accounting for 60 to 70 percent of DLA’s business annually since 1996.

 This complaint against David Lerner & Associates (DLA) alleges that since at least 2004, the closed Apple REITs have unreasonably valued their shares at a constant price of $11 notwithstanding market fluctuations, performance declines and increased leverage, while maintaining outsized distributions of 7 to 8 percent by leveraging the REITs through borrowings and returning capital to investors. As sole distributor, DLA did not question the Apple REITs’ unchanging valuations despite the economic downturn for commercial real estate.

 The FINRA article goes on to say that in its solicitation of customers to purchase Apple REIT Ten, DLA’s website provided distribution rates for all of the previous Apple REITs. These distribution figures were misleading and omitted material information because they did not disclose recent distribution rate reductions or that distributions far exceeded income from operations and were funded by debt that further leveraged the REITs.

 FINRA alleges that DLA failed to sufficiently investigate the valuation and distribution irregularities of the closed Apple REITs prior to selling Apple REIT Ten. As the sole underwriter of all of the Apple REITs, DLA was aware of the Apple REITs’ valuation and distribution practices. Rather than conduct due diligence into those valuations and distribution irregularities to determine that they were reasonable and that the Apple REITs were suitable, DLA accepted the valuations and continued to record them on customer account statements.

 This issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings as to the allegations in the complaint have not been made, and does not represent a decision as to any of the allegations contained in the complaint. Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.

This article was obtained on FINRA’s website.

If you or a family member have become a victim of the alleged fraudulent schemes of David Lerner Associates, Inc., call a Securities Arbitration Lawyer for a free consultation on how you could potentially recover you 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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May/11

19

Non-Traded REITS Investment Losses

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“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. 

The following are examples of non-traded REITs sold to investors by brokers and full service brokerage firms are as follows:

Apple REIT Six, Inc.

Apple REIT Seven, Inc.

Apple REIT Eight, Inc.

Apple REIT Nine, Inc.

Behringer Harvard REIT I, Inc.

Behringer Harvard Multifamily REIT I, Inc.

Behringer Harvard Opportunity REIT I, Inc.

Behringer Harvard Opportunity REIT II, Inc.

CNL Lifestyle Properties, Inc.

Cole Credit Property Trust, Inc.

Cole Credit Property Trust II, Inc.

Cole Credit Property Trust III, Inc.

Grubb & Ellis Apartment REIT, Inc.

Healthcare Trust of America, Inc.

Hines REIT, Inc.

Inland American Real Estate Trust, Inc.

Inland Western Retail Real Estate Trust, Inc.

KBS Real Estate Investment Trust I, Inc.

KBS Real Estate Investment Trust II, Inc.

Piedmont Office Realty Trust, Inc.

Steadfast Income REIT, Inc.

Wells Real Estate Investment Trust II

Anderson-Tully Company

Archstone

Beacon Capital Partners, LLC

Blackstone Real Estate Advisors

Fairfield Residential LLC

Federal Capital Partners

Forest Capital Partners LLC

Gables Residential Trust

INREIT Real Estate Investment Trust

RREEF America REIT II, Inc.

RREEF America REIT III, Inc.

Spirit Finance Corporation

The Community Development Trust

Verde Realty

Watson Land Company

Wereldhave USA, Inc.

Soreide Law Group, PLLC, believes 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 potentially 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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May/11

13

Are you Invested in Non-Traded REITs?

Comments off · Posted by admin in FINRA

“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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Apr/11

28

David Lerner Associates Sanctioned by the SEC For Allegedly Selling Illiquid REITs To Customers

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Back in 2004, David Lerner Associates, agreed to a “Cease and Desist” Order issued by the SEC regarding the sale of unsuitable REITs (Real Estate Investment Trusts) to 4 customers of the firm. The SEC Order read that one of the employees made investment recommendations “that his customers purchase illiquid REIT securities on margin collateralized by the customers’ bond holdings were contrary to the objectives of his customers who desired highly-liquid bond or tax-free bond issues. The margin purchases of illiquid REIT securities using the customers’ liquid bonds as collateral effectively rendered the customers’ holdings illiquid. The customers could not obtain cash by selling the REIT securities, which were illiquid, or by selling bonds, which collateralized the REIT securities.” 
Three of the customers “sustained losses arising from the illiquid REIT securities that were purchased for their accounts, as follows: (1) an 86-year old customer lost $103,281; (2) a 75-year old customer lost $37,778; and (3) a 55-year old customer lost $34,420″.
According to the SEC Order, another one of Lerner’s employees made a  ”recommendation and offer of securities that were unsuitable for his customer violated Section 17(a) of the Securities Act. [The employee's] investment recommendations were contrary to the objectives of his customer, a married, middle-aged man with two children residing in his home. The customer wanted a diversified investment for the approximately $30,000 in his IRA account. This IRA account constituted nearly all of the customer’s savings and was the customer’s financial safety net. [The employee's] concentrated the customer’s IRA account in an illiquid REIT security and did not provide the diversification that the customer desired. [The] customer sustained a loss of $6,518 arising from the illiquid REIT securities [the employee] purchased for his IRA account.”
 
If you feel you or a family member has become an alleged victim of David Lerner Associates or it’s brokers, or a similar investment in REITs, 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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Apr/11

12

Have You Experienced Losses with Behringer Harvard (Unlisted) REIT?

Comments off · Posted by admin in FINRA

Attorney Lars Soreide has recently been contacted by investors who have placed their money in unlisted REITs (Real Estate Investment Trusts), particularly, but not limited to, Behringer Harvard REIT. An unlisted REIT is a real estate investment trust that is not traded on the national stock exchanges. Unlisted, or non-traded, REITS differ from listed REITs in that they are not traded in an open market. Non-traded REITs are sold to investors who hold the product until the end of an investment term.

Behringer Harvard REIT, and other non-traded REITs, have their value set by the  companies which sell them. A listed, or public, REIT is valued daily on the market in which it is traded. A non-traded REIT’s value is determined by the staff of the REIT, or a consultant paid for by the REIT.  This can be seen as a conflict of interest in the standard valuation procedure of a non-traded REIT.

 Allegedly, many customers were not made aware of the restrictions of these products and financial advisors failed to make the true risks of these investments known to retail investors who suffered the losses. Also, the broker’s fees make it very advantageous to the broker at roughly a 15% commission.

If you feel you have been an alleged victim of  Behringer Harvard REIT, or have become of victim of a similar situation with an unlisted REIT, 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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