Stockbroker Fraud: FINRA’s Warning on Non-Trade REITs (cont)
Non-Trade REITs and a Stockbroker Fraud’s Easy Money
In today’s blog, we are going to dig deeper into stockbroker fraud and FINRA’s warnings on non-trade REITs.
- Problem with Non-Trade REITs: Seemingly attractive periodic distributions may be based on borrowed funds or a return of the investor’s principal, hiding an actual loss of value. There are no guarantees you will receive a distribution and your distributions may exceed the operating cash flow of the organization you’ve invested with. Distributions are at the sole discretion of the REIT’s Board of Directors. They can be suspended, or halted all together. These payments may be comprised of money from several different sources. In many newer programs, the cash for these distributions comes from investor capitol or borrowing. This is all cash that did not come from the property itself. Of course, if the property were generating revenue, they wouldn’t have to borrow against it to pay dividends and keep current investors from realizing there is a problem. Some REITs allow borrowing up to 100% of the property’s net assets. Leveraging can put the company at much greater risk of devaluation and default, making it difficult to liquidate your shares, as well as negatively effect distributions.
- Solution: You can research how much debt the property has incurred, or how heavily it is leveraged. First, read the REIT’s borrowing policies in it’s prospectus, then use the SEC’s EDGAR database of company filings to see how heavily leveraged it is, as well as how it finances distribution. [1]
Next on REIT Stockbroker Fraud
In this on-going series, we’ll take a look at REITs, stockbroker fraud and the tax consequences to you. If you are not getting anywhere with resolving your investment disputes and need help to discuss your options with thesecurities arbitration process, call S. David Anton of Anton Legal Group!
S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitration, giving him a unique perspective on his client’s cases.
FOR SECURITIES ADVICE, PLEASE FEEL FREE TO CONTACT DAVID ANTON OF THE ANTON LEGAL GROUP
AT (813) 443-5249
[1] http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/REITS/P124232
Stockbroker Fraud: FINRA’s warning on Non-Traded REITs
Non-Trade REITs Make Stockbroker Fraud a Snap
There’s been a rocky road and loss of faith in the stock market for a while now. With interest rates at an all time low, investors are looking for a better return on their investment. One of those higher yield investments is the real estate investment trust (REIT). There are two types of REIT, the publicly registered exchange traded REIT and the publicly registered non-traded REIT. While investing in a non-exchange REIT does not guarantee you will end up the victim of investment fraud, there is a lot of room for stockbroker fraud to occur.
Stockbroker Fraud and REITs – That’s How They Getchya!
There are several differences between non-traded and exchange REITs that make an enormous difference to investors and their assumed risk. Below is a list of the differences that can leave you open to stockbroker fraud.
- Shares of non-traded REITs do not trade on a national securities exchange and therefore are not liquid, often for periods of up to eight years or more. Many brokers are simply not forthcoming about that risk.
- Early redemption of shares is usually very limited, with enormously high fees for their sale that destroy your total return.
- Seemingly attractive periodic distributions may be based on borrowed funds or a return of the investor’s principal, hiding an actual loss of value. Dividends from REITs traded on national exchanges are usually derived solely from earnings, so it’s much harder for a broker or firm to hide a loss of market value.
Next on REIT Stockbroker Fraud Lane
In this on-going series, we’ll take a more in depth look at REITs, stockbroker fraud and why FINRA is so concerned for your investment safety. If you are not getting anywhere with resolving your investment disputes and need help to discuss your options with the securities arbitration process, call S. David Anton of Anton Legal Group!
S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitration, giving him a unique perspective on his client’s cases.
FOR SECURITIES ADVICE, PLEASE FEEL FREE TO CONTACT DAVID ANTON OF THE ANTON LEGAL GROUP AT (813) 443-5249
[1] http://www.finra.org/
Securities Arbitration: Auction Misrepresentation
Major Companies Embroiled in Securities Arbitration Case
Stockbroker fraud is not just a crime perpetrated by small time con-artists. It is a large scale problem forcing investors to file more and more securities arbitration cases against major firms. Just because a firm is large or has a recognizable name does not mean you are safe! Regardless of a firm’s name or popularity, you must perform the type of research I have outlined in previous blogs with every single investment opportunity to protect yourself from stockbroker fraud.
Auction Rate Securities Fraud Brings Multiple Securities Arbitration Suits
With auction rate securities fraud, the key is misrepresentation. The broker may tell you that certain markets are cash equivalents or an alternative to money markets, easily liquidable on short notice without jeopardy to loss of your principle investment. The broker or firm fails to mention that your ability to sell these investments relies completely on whether or not the brokerage house wants to sell, as the brokerage firm can choose to stop participating in that market at any time, leaving you holding the bag on your investment and completely unable to sell. Furthermore, it is easy for the brokerage firm to artificially inflate the value of these types of investments, since the value of the investment is based solely on how much interest a firm can generate in the product through it’s own marketing campaign. The brokerage firms generate huge fees for underwriting and administering the auctions, When these types of markets have a slump, the firm may choose to continue to participate and allow you to sell your shares or cancel participation in the market. That is exactly what happened in 2008 when several large firms decided to cancel participation in auction rate markets they had formerly advertised, leaving a rash ofsecurities arbitration cases in the wake of their decision.
The Securities Fraud Auction Rate Problem
In 2008, the New York Sun reported on a case where at least four major firms, including but not limited to UBS, Merrill Lynch, Citigroup Smith Barney, Goldman Sachs were expected to address over $150 billion in securities arbitration claims when they failed to continue to support the auctions they had been underwriting. [1] FINRA is still investigating allegations that the firms did not fairly represent the risk of the investment to their clients.
The best help with stockbroker fraud
If you are not getting anywhere with possible stockbroker fraud and need help to discuss your options, call S. David Anton of Anton Legal Group!
S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitration, giving him a unique perspective on his client’s cases.
FOR SECURITIES ADVICE, PLEASE FEEL FREE TO CONTACT DAVID ANTON OF THE ANTON LEGAL GROUP AT (813) 443-5249.
[1]http://www.nysun.com/
Investigate Before You Invest
In my last blog on securities arbitration, I promised to talk about how to investigate your broker or brokerage firm before you invest, and help save yourself from the need for securities litigation.
Step 1. Investigate the licensing of the broker and brokerage firm. Investigate the license of all parties involved before you consider if you’d like to invest. It doesn’t matter what payoff is promised. Don’t even waste your time listening to the pitch unless you have investigated their license. Securities litigation becomes necessary once a con-artist has swindled you. The name says it all. Con-artists make an art out of gaining your confidence. You need to know if those words are true before you hear the pitch on the investment. For license information on brokers, call your state’s securities regulator and FINRA (Financial Industry Regulatory Authority.) From these sources you can not only find out about licensing and registration, but also if a person or firm has a history of problems with regulators and complaints from investors. For information on investment advisers, read their registration forms. You can get their registration forms (Form ADV) online by visiting the SEC’s Investment Adviser Public Disclosure (IAPD) website. For the moment, only advisers that register electronically are catalogued in the IAPD’s database. Depending on the size of the advisor, you can also get copies of Form ADV that were not filed electronically from the investment adviser, your state securities regulator, or the SEC.
Step 2. Find out if the investment itself is registered. To find out if an investment is registered and avoid securities litigation, check it out using the SEC’s EDGAR database or call toll free at (800)732-0330. An investment being registered is not proof that the investment is legitimate. An investment not being registered isn’t necessarily a sign that the investment is illegitimate. There are companies that are exempt from registration for a myriad of reasons. However, when you check to see if a company is registered, it will tell you if they are exempt from registering. It is more risky to invest in a product when there is little to no information on it. It is easy for a broker or brokerage firm to manipulate prices or spread false information when there is no information available to prove otherwise. If an investment isn’t registered with the SEC, find out if it is registered with your state’s securities regulator. If it isn’t registered with the SEC or your state, and it’s not exempt from registration, call or write your state’s securities regulator or the SEC immediately with all the details. You very well may have discovered a scam.
In my next blog, we’ll talk about the last three steps to investigating possible investment opportunities and help keep you out of the securities litigation process. Please, if you are not getting anywhere with resolving securities issues on your own, call S. David Anton of Anton Legal Group!
S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitration, giving him a unique perspective on his client’s cases.
FOR SECURITIES ADVICE, PLEASE FEEL FREE TO CONTACT DAVID ANTON OF THE ANTON LEGAL GROUP AT (813) 443-5249.
Securities Arbitration and Securities Litigation: How do I know if I need them? (Part 4)
Last time, in my blog about securities litigation, we discussed some information about securities mediation. Today, this Tampa lawyer and certified arbitrator would like to give some more details about securities arbitration and help see if the arbitration process may be right for you.
Now that you’ve tried other dispute resolution techniques, it’s time to decide whether you want to file a claim to arbitrate. Securities arbitration may not be the best and most appropriate option for you. It really depends on your situation and objectives. If you choose to use, or are required by your agreement to use securities arbitration as opposed to civil litigation (a lawsuit), you should seriously consider hiring a Tampa lawyer for instruction and advice. Remember, the brokerage firm will most likely have a team of lawyers for consultation, so having a Tampa lawyer in your ball court will really help level the playing field.
Arbitrators like me, in general, do not have to be Tampa lawyers. They can be from any and all walks of life. They have been trained and approved, and act as arbitrators when selected to hear a case. Some arbitrators work in securities, but they could be doctors or homemakers or professional businessmen. The most important things about an arbitrator are that they be completely impartial and knowledgeable about the area of the dispute in your securities arbitration. A potential arbitrator will submit a personal profile to FINRA (the Financial Industry Regulatory Authority) detailing their knowledge of the securities industry and the concerns of an investor. If the securities arbitrator is accepted, their names go into a pool to be selected for any case matching their background. Arbitrators do not work for FINRA. They receive an honorarium from FINRA to recognize their service.
When deciding whether or not to file a securities arbitration claim, there is one factor that is vitally important to consider, up front. If your broker or brokerage firm goes out of business or files bankruptcy, you may not be able to recover your losses, even if the arbitrator or court rules in your favor. Over 80% of all unpaid awards involve a firm or individual that is no longer in business. That is why it is so important to investigate the disciplinary history of the broker and the firm you are considering investing with. I will write more on that investigation in future blogs so, stay tuned!
Please, if you are not getting anywhere with resolving securities issues on your own, call S. David Anton of Anton Legal Group!
S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitration, giving him a unique perspective on his client’s cases.
FOR SECURITIES ADVICE, PLEASE FEEL FREE TO CONTACT DAVID ANTON OF THE ANTON LEGAL GROUP AT (813) 443-5249.
Securities Arbitration and Securities Litigation: How do I know if I need them? (Part 2)
If your attempt to resolve issues with the firms management doesn’t work, it is time to seek legal advice from a Tampa lawyer with plenty of experience in securities arbitration and securities fraud. Even if your final objective is securities arbitration over civil litigation, an attorney’s advice is invaluable at this point, to help you weigh the pro’s and con’s of all available options. Although it is not a requirement, you have the right to have a Tampa lawyer present throughout the securities arbitration and securities mediation processes. Remember, the brokerage firm will definitely have the legal advantage of a lawyer on their side, why shouldn’t you have the same advantages and level the playing field?
Securities Mediation
Before entering into securities arbitration or civil litigation, your Tampa lawyer may suggest securities mediation, the logical first step in the dispute resolution process. FINRA (The Financial Industry Regulatory Authority) defines mediation as “an informal process in which a trained and impartial mediator facilitates negotiations between disputing parties, helping them to find their own mutually acceptable resolution.” [1] The difference between mediation as opposed to securities arbitration and civil litigation, is that the mediator does not impose a solution, but helps you and the other party form and accept a solution yourselves.
Mediation does not have a rigid structure and therefore varies on a case by case basis. In some cases, you and the other party might have a face to face meeting, with the mediator there to help you remain focused and reasonable. In other cases, the mediator might hold private caucuses with you and the other party separately, and would then carry communications back and forth between you and the other party. The mediation process may involve any format the mediator deems necessary to move the process forward. The mediator is there to referee, but will not have any authority to decide a settlement or even if you settle.
In my next blog, I’ll discuss details about the mediator’s function, the success rate of mediation, and we’ll talk about the next possibility for resolution, securities arbitration. Please, if you are not getting anywhere with resolving the issue on your own, call S. David Anton of Anton Legal Group!
S. David Anton, Esquire is a Certified Arbitrator for the Financial Industry Regulatory Authority (FINRA), formerly the NASD, which is the national organization responsible for overseeing the securities industry. He has served as a Judge/Panelist and rendered decisions in many securities arbitrations, giving him a unique perspective on his client’s cases.
FOR SECURITIES ADVICE, PLEASE FEEL FREE TO CONTACT DAVID ANTON OF THE ANTON LEGAL GROUP AT (813) 443-5249.
[1] http://www.finra.org/