Category Archives: Non-Traded REITs

Department of Labor Fiduciary 60-Day Rule Delays Financial Industry Crunch Time

By | Business Development Companies, Featured Investigations, News, Non-Traded REITs, Non-Traded Securities | No Comments

The new Department of Labor (DOL) Fiduciary Rule that was enacted and scheduled to begin this month on April 10th has been postponed 60 days to June 9th.  Brokerage Firms and Financial Advisors are responsible for compliance with the rules as they are now written.  Keeping in mind that the requirements may be modified or eliminated based on the what happens during the 60-day delay. Klayman & Toskes, P.A. is monitoring the developments and will keep investors posted and provide further updates as they become available.

Best Interest Contract (BIC)

Brokerage firms and financial advisors who recommend investment of retirement funds into investment and insurance products that provide commission-based compensation are subject to Best Interest Contract disclosure requirements.  The BIC requires the disclosure of compensation to the client and the acknowledgement of the Fiduciary Standards, which are met through the recommended investment.

Fiduciary Standards

Under the current DOL Fiduciary Rule, brokerage firms and financial advisors are considered Fiduciaries for all retirement accounts.  Accordingly, the following fiduciary standards must be met:

Avoid Conflicts of Interest

This primarily refers to receiving Commissions on brokerage accounts or compensation paid by Product Vendors.  The BIC allows the payment of commissions to brokerage firms and financial advisors but requires that all other aspects of the fiduciary standards are followed.

Advice Must Be in Client’s Best Interest

A written explanation and proof of “client’s best interest” will be required for every transaction.

Give Prudent Advice

Financial advice must be prudent and suitable based on the clients’ risk tolerance, in the clients’ best interest, have reasonable expenses and pay no more than reasonable compensation.

The DOL Fiduciary Rule recommends two tiers of investments when giving advice on retirement accounts. The second Tier of investments will be prohibited in retirement accounts unless an exception is provided.  The prohibited investments include, Illiquid and difficult to value securities, such as:

About Klayman & Toskes, P.A.

Klayman & Toskes, P.A. is dedicated to the protection of investor rights and the recovery of investment losses in retirement accounts that are the result of violations of FINRA sales practice rule and regulations.

 

The Securities Arbitration Law Firm of Klayman & Toskes, P.A. Launches Investigation into Cetera Advisors Sales Practice Violations Related to Solicited Investments in Non-Traded REITs and BDCs

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New York (Globe Newswire) – March 24, 2016 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, announces an investigation into Financial Industry Regulatory Authority (FINRA) sales practice violations by Cetera Advisors related to solicited investments in non-traded Real Estate Investment Trusts (“REITs”) and Business Development Companies (“BDCs”).  According to K&T, the scope of the investigation includes whether Cetera Advisors made suitable recommendations related to non-traded REITs and BDCs; whether adequate disclosure was made of the fees, costs and risks of non-traded REITs and BDCs and whether the high commissions paid to Cetera Advisors resulted in conflicts of interest.

Effective April 11, 2016, new regulations related to valuation disclosure requirements, FINRA Notice to Members 15-02, instruct brokerage firms to be more transparent through greater disclosure concerning non-traded REITs and BDCs on account statements. Securities attorney Steven D. Toskes, Esq. comments on the new regulatory notice, ”Investors will now receive more accurate disclosure for non-traded REITs and BDCs, including valuations of deductions for syndication costs, as high as 10%, and any changes in the value of underlying assets.” Mr. Toskes explains, “Our investigation is to determine whether financial advisors failed to adequately disclose the risks related to liquidity and effects of syndication costs on the valuation of non-trade REITs and BDCs.”

Our investigation of Cetera Advisors includes sales practices violations related to investments in non-traded REITs and BDCs include, but not limited, to the following:

  • America Realty Capital Properties (Vereit);
  • Cole Capital REITs;
  • CNL Corporate Capital Trust;
  • Franklin Square Energy and Power Fund;
  • Griffin Capital;
  • Northstar Real Estate Income; and
  • Sierra Income Corporation.

FINRA sales practice rules related to potential violations may include misrepresentations and omissions of material facts, conflicts of interest, unsuitable investment advice, securities concentration, or failure to supervise its financial advisors. Our investigation relates to Cetera Advisors solicited investments in non-traded REITs and BDCs for customer accounts.

About Klayman & Toskes, P.A.

K&T is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors such as non-profit organizations, public and multi-employer pension funds in large and complex securities matters. K&T has office locations in California, Florida, New York and Puerto Rico. If you wish to discuss this announcement or have knowledge of Cetera Advisors’ sales practices related to non-traded REITs and BDCs can contact us, or call Steven D. Toskes, Esq. at 888-997-9956.

 

Notice to All United Development Funding IV Investors with Losses in Excess of $250,000 from the Securities Arbitration Law Firm of Klayman & Toskes, P.A.

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New York (Globe Newswire) – March 2, 2016 – The Securities Arbitration Law Firm of Klayman & Toskes, P.A. (“K&T”), www.nasd-law.com, provides notice to all United Development Funding IV (NASDAQ:UDF) investors with full-service brokerage accounts. Class action lawsuits have been filed against company and its officers only.  Investors with full-service brokerage firms should consider all investment loss recovery options including, claims filed with the Financial Industry Regulatory Authority (“FINRA”) for sales practice violations. According to a study conducted by K&T, investors can expect to recover only a small fraction of their estimated damages through participation in a class action lawsuit.

According to securities attorney Steven D. Toskes, Esq., “The greater the investment loss, the more viable an individual securities arbitration claim becomes for recovery of investment losses. An individual arbitration claim filed with FINRA increases the likelihood of a larger recovery of your investment loss.” Mr. Toskes explains, “An individual securities arbitration claim for sales practice violations is based on facts specific to the handling of an individual investor’s entire brokerage account. As a result, investor-specific considerations provide the basis for recovery of losses from all of the securities held with a brokerage firm.”

Brokerage firms that sold and marketed investments in United Development Funding IV were obligated to conduct adequate due diligence of facts concerning the risks associated with the investments, including fraud. Investors in United Development Funding IV investors were told that these securities were suitable for current income investment objectives. Brokerage firms are obligated to give, and investors are entitled to rely upon brokerage firms for, suitable and competent investment advice in accordance with FINRA rules and regulations. Recommendations of unsuitable investments and/or failure to conduct adequate due diligence are both causes of action that form the basis for individual securities arbitration claims filed with FINRA. 

About Klayman & Toskes, P.A.

K&T is a leading national securities law firm which practices exclusively in the field of securities arbitration and litigation, on behalf of retail and institutional investors such as non-profit organizations, public and multi-employer pension funds in large and complex securities matters. K&T has office locations in California, Florida, New York and Puerto Rico. Investors, with losses in excess of $250,000 in United Development Funding IV, or who have knowledge of full-service brokerage firm sales practices, Contact Us, or call Steven D. Toskes, Esq. at 888-997-9956.

LPL Financial LLC Ordered To Pay Restitution To Investors and Fines To FINRA for Failure To Supervise Sale of Non-Traded REITs, Variable Annuities and Exchange Traded Funds

By | Blog, Featured Investigations, FINRA Sales Practice Violations, Non-Traded REITs, Securities Arbitration, Variable Annuities | No Comments

Financial Industry Regulatory Authority (FINRA) sanctioned LPL Financial, LLC with fines of $10 million for, “broad supervisory failures in a number of key areas, including the sales of non-traditional exchange-traded funds (ETFs), certain variable annuity contracts, non-traded real estate investment trusts (REITs) and other complex products”.  Additionally, FINRA ordered that $1.7 million in restitution be paid to investors by LPL Financial to certain customers who purchased non-traditional ETFs.

 

FINRA Examination Findings
According to FINRA regulators, “LPL’s supervisory breakdowns resulted from a sustained failure to devote sufficient resources to compliance programs integral to numerous aspects of its business.” This lack of resources resulted in transactions in complex investment products including non-traded REITs, variable annuities and exchange traded funds that were not properly supervised. The FINRA examination of LPL Financial supervisory procedures found the following:

 

Non-traditional ETFs: LPL Financial “did not have a system to monitor the length of time that customers held these securities in their accounts, concentration limits of those products in customer acclonts, and failed to ensure that all of its registered representatives were adequately trained on the risks of the products.”

 

Variable Annuities: LPL Financial “failed to supervise its sales of variable annuities, in some instances permitting sales without disclosing surrender fees, and in connection with certain mutual fund “switch” transactions, it used an automated surveillance system that excluded these trades from supervisory review.”

 

Non-traded REITs: LPL Financial “Failed to Supervise non-traded REITs by, among other things, failing to identify accounts eligible for volume sales charge discounts.”

 

FINRA examinations are intended to uncover failures to comply with rules and regulations designed to protect investors. According to the FINRA news release, LPL Financial “failed to report certain trades to FINRA and failed to ensure it provided complete and accurate information to FINRA and to federal and state regulators concerning certain variable annuity transactions.” FINRA found, “LPL failed to reasonably supervise its advertising and other communications, including its registered representatives’ use of consolidated reports. LPL did not monitor the creation or use of consolidated reports, and failed to ensure that these reports reflected complete and accurate information.” These findings assert that LPL Financial, in its communications with both regulators and investors, have not complied with securities industry sales practice rules and regulations.

 

Klayman & Toskes, P.A. is a securities litigation law firm dedicated to the protection of investor rights. We can help investors recover investments losses in non-traded REITs, variable annuities and exchange traded funds that are the result of LPL Financial violations of FINRA sales practice rules and regulations.

Do you have a question or need more information? Get in touch with us