Financial Counsel by Eccleston Law

FINRA Amends Enforcement Action Against David Lerner Associates Naming David Lerner Personally

FINRA has amended their enforcement action against David Lerner Associates to add David Lerner personally for allegedly misleading investors about the risks involved in investing in the Apple REITs (for which David Lerner Associates is the sole distributor) and also about the valuations of the REITs.  This is the second enforcement action filed by FINRA against the firm in the past year.

According to the recent complaint, FINRA is taking issue with David Lerner's response to FINRA's first enforcement action, which resulted in the firm sending out more than 50,000 letters to investors to counter the negative press the firm received in the wake of the first enforcement action. The letter also allegedly contains statements made to investors about a possible consolidation of the Apple REITs for listing on a national exchange to dispose of the illiquid shares that they held.  FINRA is arguing that the statements about a possible consolidation and listing of the non-traded REITs were made in order to induce new and existing customers to purchase shares in the Apple REITs.

To many investors, this development may come as a surprise. Many investors were not fully informed of the risks involved in purchasing an Apple REIT and believed that this investment was suitable for their investment objectives, age, and risk tolerance.

If you have invested in any of the Apple REITs upon the recommendation of David Lerner Associates, please contact one of our attorneys at 312-332-0000.  Our attorneys are representing investors who have suffered losses investing in the Apple REITs along with those who are seeking to rescind (get out of) their investment in these products.

FINRA Files Second Enforcement Action Against David Lerner Associates

FINRA has recently filed a second enforcement action against David Lerner Asosicates for allegedly misleading investors about the risks involved in investing in the Apple REITs (for which David Lerner Associates is the sole distributor) and also about the valuations of the REITs.  This is the second enforcement action filed by FINRA against the firm in the past year.

According to the recent complaint, FINRA is taking issue with David Lerner Associates' response to FINRA's first enforcement action, which resulted in the firm sending out more than 50,000 letters to investors to courter the negative press the firm received in the wake of the first enforcement action. The letter also allegedly contains statements made to investors about a possible consolidation of the Apple REITs for listing on a national exchange to dispose of the illiquid shares that they held.  FINRA is arguing that the statements about a possible consolidation and listing of the non-traded REITs were made in order to induce new and existing customers to purchase shares in the Apple REITs.

To many investors, this development may come as a surprise. Many investors were not fully informed of the risks involved in purchasing an Apple REIT and believed that this investment was suitable for their investment objectives, age, and risk tolerance. 

If you have invested in any of the Apple REITs upon the recommendation of David Lerner Associates, please contact one of our attorneys at 312-332-0000.  Our attorneys are representing investors who have suffered losses investing in the Apple REITs along with those who are seeking to rescind (get out of) their investment in these products.

 

Behringer Harvard Short Term Opportunity Fund I Investor Loss Recovery Options

Investors who suffered losses in the the Behringer Harvard Short Term Opportunity Fund may be able to recover their losses through FINRA arbitration.  Following a drop in price from $6.48 to $.40 a share between December 2010 and December 2011, clients may be seeking answers to why this fund dropped so signifcantly.

If you are an investor in a non-traded REIT or in the Behringer Harvard Short Term Opportunity Fund, you may be able to recover your losses through securities arbitration.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing in Behringer Harvard Short Term Opportunity Fund I, please contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000 to discuss you recovery options.

Independent Financial Group Investor Loss Recovery Options

Charges have recently been filed with the Financial Industry Regulatory Authority (“FINRA”) against broker James Lamont and Independent Financial Group. The charges allege that James Lamont recommended tenancies-in-common interest, or TICs, to retired and inexperienced investors. As a result of these allegations, the attorneys at Eccleston Law are actively seeking investors who have suffered losses in tenancies-in-common sold through Independent Financial Group.

Tenancies-in-common, or “TICs”, are a type of concurrent ownership of real property by two or more parties. Mostly, investments like TICs are reserved for accredited investors meeting a very specific income and investment experience criteria.

According to the FINRA arbitration claim, James Lamont allegedly explained to his investors that they would receive regular income payments and care-free professional management of the property. The property in which Lamont allegedly suggested his clients’ invest in was incredibly weary; the property consisted of two shopping malls that were eventually sold in foreclosure by mid-2011, shortly after Lamont allegedly suggested the investment.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations and breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered substantial losses investing in tenancies-in-common through Independent Financial Group, your losses may be recoverable through securities arbitration. Please contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000 to discuss your recovery options.

Sunwest Management Investor Loss Recovery Options

The SEC has recently filed charges against Sunwest Management and former CEO Jon Harder. The SEC alleges that Sunwest misled investors by guaranteeing a steady income from tenancies-in-common investments. Sunwest raised $300 million from more than 1,300 and promised investors that the properties would generate annual returns of 10%. The SEC alleges that at least half the properties proved faulty and lost money. Sunwest allegedly paid investors from commingled funds and mortgage refinancings to cover any deficiencies in returns.

Tenancies-in-common, or “TICs”, are a type of concurrent ownership of real property by two or more parties. Mostly, investments like TICs are reserved for accredited investors meeting a very specific income and investment experience criteria.

The Tenant-In-Common Association (TICA), a TIC trade group, suggests that TICs be structured as securities to protect investors and advisors. While TICs are a legitimate investment when properly invested, Wes Larson of ClearView Real Estate Capital thinks real estate TICs will disappear as “no broker will want to take the risk of being run up on securities fraud.”

Recently there has been a spike in securities fraud allegations following the charges filed against DBSI, a TIC operator allegedly responsible for defrauding investors out millions of dollars. These charges along with the charges filed against Sunwest have seemingly discouraged investors from TIC securities investments.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by securities fraud, unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses investing with Jon Harder or in Sunwest Management, please contact one of our attorneys to discuss your recovery options.

Leo T. Buggy Investor Loss Recovery Options

According to an SEC release, AXA Advisors was cited for failing to reasonably to supervise Leo T. Buggy (“Buggy”) with a view to preventing and detecting his violations of the federal securities laws during the period December 2005 through December 2008. During this time period, Leo Buggy fraudulently induced customers to redeem securities held at AXA Advisors, including variable annuities and mutual funds, under the false representation that the proceeds from such redemptions would be invested in other securities through AXA Advisors. Instead, Leo Buggy caused customers to place those funds in a bank account controlled by Buggy, from which he misappropriated the funds.

Leo Buggy was a registered representative with AXA Advisors from 1982 through January 2009, when he was terminated in connection with the matters discussed herein. From 2005 forward, Leo Buggy operated out of an AXA Advisors’ office in Rock Springs, Wyoming, where he was the sole registered representative, or from his home in Green River, Wyoming, and was supervised by an AXA Advisors’ branch office in Salt Lake City, Utah.

On July 10, 2009, in the United States District Court for the District of Wyoming, Leo Buggy was charged with three counts of mail fraud, wire fraud, and money laundering. Leo Buggy entered a plea of guilty, and on October 16, 2009, Leo Buggy was sentenced to forty-six months in prison to be followed by three years supervised probation upon his release.

Leo Buggy fraudulently induced investors, who were customers for whom he acted as registered representative, to redeem securities, including variable annuities and, to a much lesser extent, mutual funds, under the false representation that he would invest the proceeds for them in other securities products. Based on these representations, customers authorized the redemptions of variable annuity and the proceeds were sent to them at their home address or wired directly into their personal bank accounts. Leo Buggy then misappropriated the proceeds by causing the customers either to write checks payable to “Equitable Life” that Leo Buggy deposited into an account at a local bank that Leo Buggy controlled for his personal benefit, or to wire funds directly into that account. Buggy gave his personal account the name “Leo T. Buggy - Equitable Life Agency,” a name similar to an AXA Advisors affiliate, which enabled him to deposit checks that appeared to be made out to legitimate AXA Advisors entities and further misled customers into believing that their funds were being invested in AXA Advisors securities. Altogether, Leo Buggy fraudulently misappropriated approximately $1.2 million from seven customers (three individuals and two couples) in approximately 32 transactions.

AXA Advisors was cited for failing to implement adequate procedures regarding the review of redemptions by customers of variable annuities. During the relevant period, AXA Advisors had procedures in place requiring supervisory review of securities transactions but did not have in place adequate procedures for the review of redemptions of variable annuities which occurred in the accounts of Leo Buggy’s customers. Leo Buggy had customers partially redeem their variable annuities and then reinvest the funds in his “Leo T. Buggy - Equitable Life Agency” personal account. Had Respondent implemented adequate procedures for supervisory review of redemptions from the variable annuities of Leo Buggy’s customers, Leo Buggy’s conduct likely would have been detected and prevented.

If you are an investor that has suffered losses investing with Leo Buggy or Leo T. Buggy - Equitable Life Agency, you may be able to recover your losses through FINRA arbitration.  Please contact one of our attorneys for a FREE, NO OBLIGATION CONSULTATION to discuss your recovery options.

2011 Returns Show Why Apple REIT Investments Are So Unsuitable For Most Investors

Forget that David Lerner Associates has thrown out the window any semblance to commonly accepted investment norms, by failing to asset allocate among stocks, bonds and cash, for example (read: imprudent). Then forget about the fact that the Apple REITs concentrate in real estate (read: reckless and dangerous).  What’s left is a complete concentration in real estate, and real estate that is limited to just one sector – the hotel industry (with a large concentration there still in the extended stay hotel industry) (read: certifiably crazy).

And now the numbers.  While the headlines discuss how well “real estate investments” performed in 2011, drilling down one finds an alarming disparity between the performance winners and the losers.  Unfortunately for Apple REIT investors, the lodging and resort segment of the real estate market were the Biggest Losers of the Year!  Down 14.31%!  Compare that to self-storage (up 35%) and event apartments (up 15%) and you get the picture.

David Lerner and its Apple REITs have a lot of problems, and investors are taking note by retaining law firms like ours to file claims to recover their investment losses and rescind (get out of) their investments.  Bad performance – indeed the worst sub-sector performance in the real estate investment area -- is another straw breaking the camel’s back!

Morgan Keegan and Raymond James: Comparing the Retention Bonus Math to Transition Bonus Math Is Just the Beginning of the Analysis

Top producing transitioning advisers should expect to receive two and one-half to three and one-half times their trailing 12 month production, while top producing reps at Morgan Keegan reportedly are expected to be paid a mere 65% to 70% of their trailing 12. This disparity prompted Investment News this week, and several pundits, to begin speculating as to how many top producing reps will leave Morgan Keegan for greener pastures. Investment News went so far as to run a lead story on the matter, “RJ Buy May Be Tough Sell to Keegan Reps.” No doubt, Investment News and the pundits may be right. Indeed, Raymond James has built in clawback provisions in the deal to remedy any rep departures.

But there is much more to the analysis than just the mathematical, bonus percentage comparison. Beyond comparing the math, one needs to compare the terms of the promissory notes, the new firm’s employment agreement restrictions on solicitation, competition, confidentiality, and, of course, termination and TROs (court injunctions). That’s the starting point, for an analysis that we frequently are retained to conduct on behalf of reps contemplating a move. A move may make sense, but only after careful attorney analysis, as well as negotiation with the new firm (well in advance of the move date) to improve upon the always-one-sided contract provisions that firms try to have unsuspecting reps sign.

New Supervision Guidelines Will Require Technology, Vigilance and Documentation

The SEC and FINRA have issued a new branch inspection program that includes guidelines for firms to better supervise advisers.

Among other components of an effective supervisory system, the guidelines recommend that offices be surprise “re-audited” when routine inspections reveal a high number of deficiencies.  Additionally, firms should use comprehensive checklists that use previous inspection findings and trends noted in internal reports.  Finally, the regulators recommend that firms provide branch office managers  with the firm’s internal inspection findings and require them to take and document corrective action.

Eccleston Law is Actively Seeking Investors Who Suffered Losses with Burton Douglas Morris

Based on a recent SEC enforcement action, from approximately 2005 through 2011, the Burton Douglas Morriss, through several private equity funds and fund management companies he controlled, allegedly fraudulently transferred approximately $9.1 million dollars of investor funds to himself. Burton Douglas Morriss’ companies are believed to have disguised the transfers as loans without the knowledge or consent of investors.

In addition, Morriss and the management company he controlled allegedly came up with a scheme to recruit new investors to purchase membership interests in one of the private equity funds, MIC VII, LLC. Effectively, Morriss is believed to have used the $2.5 Million in investor funds to satisfy a portion of a personal loan.

Unbeknownst to investors, Morriss allegedly misappropriated more than $9 Million from the investment entities for his personal use. As early as 2005 Morriss was taking funds from Acartha Group, while at the same time lending money to it. By the summer of 2009, Morriss is believed to have borrowed more money than he had advanced to Acartha Group and other investment entities. By the end of 2009 Morriss and Morriss Holdings allegedly owed Acartha Group, MIC VII, ATP, and Gryphon Investments approximately $2 million dollars.

The SEC has alleged that Burton Morriss, Acartha Group, MIC VII, ATP, and Gryphon Investments have defrauded investors by failing to disclose that Morriss would or could use investor proceeds for personal use.

Eccleston law represents individual and institutional investors nationwide to recover their investment losses caused by unsuitable investment recommendations, breach of fiduciary duty, negligence or other misconduct. We have extensive experience representing investors in arbitration and litigation disputes with securities broker-dealers and investment advisory firms, and have recovered tens of millions of dollars for investors.

If you are an investor that has suffered losses with Burton Douglas Morriss or any of  his associated entities, please contact one of our attorneys at 312-332-0000 to discuss your recovery options.