TAG | Tenants in Common
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Soreide Law Group has file a FINRA arbitration on behalf of an investor who was sold the NNN St. Charles 6, LLC, Tenant in Common Investment along with an investment in a private placement called Commonwealth Capital Corp.’s income and Growth Fund V. These investments were sold by Ellen Erenstein.
Ellen Erenstein, from South Florida, registered as a representative with Investors Capital Corp. (f/k/a Eastern Point Advisors, Inc.), August 2003 to October 2006, and between October 2006 and July 2010, with Workman Securities Corporation, both registered with FINRA, was permanently barred from the securities industry in September, 2012. Erenstein sold many Tenant in Common (“TIC”) investments, Doral Court and Shoreview Corporate Center, to name a few. Erenstein marketed these TIC investments allegedly to retirees and other investors not looking for risky or unsuitable investments to add to their otherwise conservative portfolios. Due to the real estate market, many TIC investors have lost their entire investment. TIC investments have often proven to be more profitable to the brokers, due to the high commissions, who sell them, than they are to the clients who buy them.
If you were a client of Ellen Erenstein, you may have a potential claim for recovery. Call Soreide Law Group for a free consultation with an attorney: 888-760-6552.
Commonwealth Capital Corp Income and Growth Fund V · Doral Court · Eastern Point Advisors Inc · Ellen Erenstein barred by FINRA · Ellen Erenstein FL · Ellen Erenstein TIC sales loss · investors capital corp · NNN St. Charles 6 LLC TIC · Shoreview Corporate Center. · Tenant-in-Common losses · Tenants in Common · TIC loss recovery lawyer · TICs · workman securities corporation
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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|Broker-dealers that sold tenant in common exchanges from the now-bankrupt DBSI||Commissions generated|
|Berthel Fisher & Co.||$5,581,000|
|QA3 Financial Corp.||$5,455,000|
|DeWaay Financial Network Inc.||$3,632,000|
|The Private Consulting Group (Closed March 2009)||$3,580,000|
|Questar Capital Corp.||$2,128,000|
|AFA Financial Group Inc. (Closed in April 2010)||$2,000,000|
|G.A. Repple & Co.||$1,525,000|
|Equity Services Inc.||$1,348,000|
|KMS Financial Services Inc.||$1,341,000|
|Alternative Wealth Strategies Inc.||$1,120,000|
|First Montauk Securities Corp. (Closed December 2008)||$1,113,000|
|J.P. Turner Co. LLC||$898,000|
|CapWest Securities Inc.||$774,000|
|Direct Capital Securities Inc. (Closed February 2010)||$734,000|
|LaSalle St. Securities||$685,000|
|GunnAllen Financial Inc. (Shut down March 2010)||$661,000|
|Steven L. Falk & Associates||$581,000|
|American Independent Securities Group||$524,000|
|Capital Financial Services||$481,000|
|National Securities Corp.||$454,000|
|Calton & Associates||$435,000|
|Intermountain Financial Services Inc.||$411,000|
|Advisory Group Equity Services Ltd.||$410,000|
|Brecek & Young Advisors Inc. (Merged into Securities America Corp. in 2009)||$383,000|
|Milestone Financial Services Inc.(Closed in October 2008)||$373,000|
|Capital Analysts Inc.||$339,000|
|Beneficial Investor Services (firm’s status as broker-dealer unclear)||$322,000|
|Fox & Company Investments Inc. (Closed December 2008)||$317,000|
|Private Asset Group Inc. (Closed in April 2010)||$316,000|
|Alliance Affiliated Equity Corp.||$304,000|
|Sigma Financial Corp.||$279,000|
|OMNI Brokerage Inc.||$271,000|
|K-One Investment Co. Inc. (Closed June 2009)||$268,000|
|Empire Securities Corp. (Closed April 2010)||$265,000|
|Burch and Company||$260,000|
|Regent Capital Group Inc.||$252,000|
|J.W. Cole Financial Inc.||$244,000|
|Investment Security Corp.||$236,000|
|Professional Asset Management Inc.||$235,000|
|TransAm Securities Inc.||$233,000|
|American Wealth Management Inc.||$225,000|
|MCL Financial Group Inc.||$210,000|
|Girard Securities Inc.||$204,000|
|Philip Oleson (Registered rep affiliated with Independent Financial Group LLC)||$195,000|
|Inlet Securities LLC||$191,000|
|Cullum & Burks Securities Inc. (Shut down in May 2010)||$189,000|
|Sammons Securities Co. LLC||$186,000|
|Empire Financial Group Inc. (Closed November 2008)||$185,000|
|Midpoint Financial Services Inc. (Closed December 2008)||$168,000|
|Cambridge Investment Research Inc.||$149,000|
|Regal Securities Inc.||$135,000|
|Crews & Associates Inc.||$130,000|
|Finance 500 Inc.||$127,000|
|Ogilvie Security Advisors Corp.||$123,000|
|NEXT Financial Group Inc.||$121,000|
|Portfolio Advisors Alliance Inc.||$120,000|
|American Portfolios Financial Services Inc.||$116,000|
|Partnervest Securities Inc.||$114,000|
|Partnervest Financial Group LLC (holding company for Partnervest Securities)||$114,000|
|Great Northern Financial Securities Inc. (Closed in March 2006)||$109,000|
|Harrison Douglas Inc.||$108,000|
|The Street Inc.||$105,000|
|Sterling Enterprises Group Inc.||$88,000|
|Nations Financial Group Inc.||$88,000|
|Intervest International Equities Corp.||$79,000|
|Mid Atlantic Capital Corp.||$75,000|
|Resource Horizons Group LLC||$66,000|
|Basic Investors Inc. (Closed in October 2008)||64,000|
|Costa Financial Securities Inc. (Shut down February 2008)||$62,000|
|Sanders Morris Harris Inc.||$61,000|
|MICG Investment Management LLC (Shut down May 2010)||$59,000|
|Merrimac Corporate Securities Inc.||$58,000|
|Dawson James Securities Inc.||$57,000|
|RP Capital LLC||$51,000|
|Brewer Financial Services LLC||$48,000|
|NFP Securities Inc.||$45,000|
|Centaurus Financial Inc.||$44,000|
|Courtlandt Financial Group Inc., securities offered through Courtlandt Securities Corp.||$39,000|
|Independent Financial Group LLC||$36,000|
|Capital Management Securities Inc.||$35,000|
|Morgan Peabody Inc. (Closed October 2008)||$33,000|
|CFD Investments Inc.||$33,000|
|Money Concepts Capital Corp.||$29,000|
|Notman Financial Group (affiliated with Berthell Fisher)||$20,000|
|Capital Quest Securities Inc.||$20,000|
|Charter Pacific Securities LLC (Closed October 2008)||$19,000|
|NewBridge Securities Corp.||$17,000|
|Great American Advisors Inc.||$16,000|
|Okoboji Financial Services (Closed May 2010)||$15,000|
|Miller Johnson Steichen Kinnard Inc. (Closed in January 2008)||$15,000|
|Northland Securities Inc.||$14,000|
|Mcginn Smith & Co. Inc. (Closed in August 2010)||$11,000|
This information was obtained from an article in InvestmentNews.com
If you feel you have been an alleged victim of these broker-dealers that sold TICs from DBSI, 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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As a follow up to our posting from Finra, the following is an article by Bruce Kelly on April 7, 2011, in InvestmentNews.com dealing with the Finra Reg D crackdown.
Kelly says that Finra has unleashed its first round of fines and sanctions against broker-dealers and executives from firms that sold private placements that have collapsed. In doing so, the industry’s self-regulator cited a lack of due diligence by both firms and executives in selling the high-risk products.
Finra, or the Financial Industry Regulatory Authority Inc. named two series of private placements, notes issued by Medical Capital Holdings Inc. and preferred stock from Provident Royalties LLC, as problematic. Finra imposed the sanctions against the firms and execs for failing to conduct a reasonable investigation of the sale of those products. In 2009, the Securities and Exchange Commission charged both those private-placement sponsors with fraud.
The largest fine — $700,000 — was levied on Workman Securities Corp., which was ordered to pay $700,000 in restitution to clients. InvestmentNews previoulsy reported that sanction.
Finra fined another broker-dealer, Askar Corp., $45,000 for failure to conduct due diligence of private placements from DBSI Inc., a failed real estate syndicator that is now in bankruptcy.
Kelly goes on to say that the firm generated $578,000 in commissions from sales of DBSI’s tenant-in-common exchanges, according to court documents All three products — Medical Capital notes, Provident stock and DBSI tenant-in-common exchanges — were wildly popular products sold by dozens of independent broker-dealers in the last decade. Some of the biggest sellers of the deals, QA3 Financial Corp., GunnAllen Financial Inc. and Okoboji Financial Services Inc., have since shut down, unable to bear the cost of lawsuits stemming from angry clients who bought the products.
Workman’s reps sold a little more than $9 million of Provident Royalties private placements, from last summer in the Northern District of Texas bankruptcy. The amount of Medical Capital notes the firm’s reps sold to investors is not known. Finra specified that the $700K is to go to Workman’s clients as restitution.
Finra’s series of actions, focused on executives at broker-dealers failing to look into or investigate the private placements their firms sold. The regulator’s crackdown undoubtedly will hit a nerve with many small and midsize independent broker-dealers, many of whom claim they don’t have the resources to investigate the private placements they sell. Instead, the firms tend to rely on outside due diligence professionals, mostly attorneys, to examine and analyze the products. But those due diligence attorneys often take fees to write reports from the product sponsors. Much like sell-side research on Wall Street, the lawyers’ financial relationships with sponsors raises questions about potential conflicts of interest.
Private placements were high-commission products, typically offering reps and advisers a commission of 7% or 8%. Broker-dealers and the executives should have looked at the private-placement offerings much more closely, Brad Bennett, Finra executive vice president and chief of enforcement, noted in a statement.
“Senior officials at these firms failed to fulfill their responsibilities to customers by not conducting reasonable investigations of these unrelated offerings, especially in light of multiple red flags suggesting liquidity concerns, missed interest payments and defaults,” Mr. Bennett stated. “Finra will continue to look closely at sales of both affiliated and unaffiliated private placements to determine whether the selling firms fulfilled their responsibility to customers.”
Finra barred or suspended seven executives as part of its action. Each signed letters of acceptance, waiver and consent, and neither admitted nor denied the findings. The two broker-dealers also signed such letters.
David William Dube, owner of the defunct Peak Securities Corp., was barred.
Timothy Cullum, former CEO of now-defunct Cullum & Burks Securities Inc., was suspended for six months as a principal and fined $10,000. Steven Burks, former president of the B-D, received the same sanction.
Robert Vollbrecht, Workman’s former president, was barred as a principal and fined $10,000.
The InvestmentNew.com article goes on to say that in addition, two former executives at Capital Financial Services Inc., Jeffrey Lindsey and Bradley Wells, were suspended as principals for six months and fined $10,000 each. Likewise, Jay Lynn Thacker, one-time chief compliance officer at Meadowbrook Securities LLC, which was formerly InvestLinc Securities LLC, was hit with the same suspension and fine.
If you feel you have been a victim of these alleged fraudulent schemes, 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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This investment scheme involves a producer who sells investors an undivided piece of real estate to be tenants in common (TIC) with other investors. The investors are typically strangers to each other. The projects are marketed as investments that will have professional management, generate continual cash flow, tax deferral and future appreciation. First of all, if you were sold an interest in such an investment pool by a real estate agent, you may have a cause of action against them. This is because interests in real estate held as a TIC with others is considered by federal regulators to be a security. Therefore, these interests can only be sold by licensed securities brokers. But even then, problems can abound. Sometimes problems arise at the sponsor level, and sometimes the problems arise at the securities broker level. Adequate investigations regarding the packages are often not performed. Problems generally are external, that is, they rely on the strength of the real estate market. But in most cases the broker or sponsor will claim the problems were unforeseen, when in reality they were highly foreseeable.
Many marketers of TIC investments violated state and federal securities registration laws. If the TIC you purchased is not properly registered many investors may be entitled to rescind their entire investment. Many of these TICS were marketed by FINRA registered broker dealers and actions for recovery can be brought through the securities arbitration process.
If you have suffered losses from Tenants In Common (TIC) , please contact Soreide Law Group and speak to an attorney to determine whether you have a claim against the brokerage firms where facts were not disclosed or not investigated. Call (888) 760-6552 or visit our website at: http://www.stockmarketlawsuit.com.
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