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.

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.

BEHRINGER HARVARD ATTRIBUTES DECLINE IN VALUE OF SHARES TO “ECONOMIC CONDITIONS”

Behringer Harvard Opportunity REIT I has plummeted in value since 2009. The Behringer REIT was formerly valued at $7.66 per share and has experienced a 46% drop bringing it down to $4.12 per share. This is typically not common for non-traded REIT’s since their primary goal is to provide investors with a substantial return from the principal. The return usually ranges anywhere between 6 to 7 percent.

The valuation of the REIT has drop due to a decline in the trusts assets and in the real estate properties in the portfolio. A decline in September to the trust’s  real estate properties was noted—with a loss of $83 million dollar--and a stark decline was also reported in December with the REIT possessing only $697.6 million dollars in assets.

Additionally, Behringer Harvard Opportunity Advisors LLC have cut fees for advisors but remain on the decline and are slowly relinquishing their power as the fourth-largest non-listed REIT (based on assets).  Though Behringer Harvard REIT I and Behringer Harvard Opportunity REIT I, Inc. differ in style, both have depreciated in value.

Estimates have been made that the value of the non-traded REIT will eventually rise. Although there is speculation and the company anticipates the shares valuation will increase when market conditions stabilize, the current state of the REIT is looking fairly bleak and the overall value remains low with little to know benefit from investment.

Wells Fargo Reverse Convertible Investor Loss Recovery Options

The Financial Industry Regulatory Authority (“FINRA”) recently fined Wells Fargo & Co. $2 million recently for the actions of Alfred Chi Chen, a retail investment advisor registered with the firm. Chen placed roughly all the assets in the hundreds of accounts he was managing into reverse convertibles. As a result of this significant fine by FINRA, the attorneys at Eccleston Law are actively seeking investors who have suffered losses in reverse convertibles sold through Wells Fargo & Co.

Reverse convertibles, also known as “reversible notes” or “reverse exchangeable securities”, are a type of structured product that generally is composed of high yield, short term note that is linked to the performance of an unrelated asset, which is often stock. Reverse convertibles are not traded on exchanges and their performance is not reported publicly.

Mostly, reverse convertibles are reserved for extremely wealthy customers and hedge funds; in the case of Chen, most of his customers were elderly with no investment experience and very little savings to invest. Chen also bought reverse convertibles for recently deceased clients.

Eccleston Law represents individual and institutional investors nationwide to recover their investment losses caused by security 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 substantial losses investing in reverse convertibles through Wells Fargo & Co. and/or Alfred Chi Chen, your losses may be recoverable through securities arbitration. Please contact Jim Eccleston at the Eccleston Law Offices at 312-332-0000

Coadum Advisors Investor Loss Recovery Options

Thomas Repke and James Jeffrey of Coadum Capital have both pled guilty recently to conspiracy to defraud approximately $20 million from 200 or so investors. Repke and Jeffrey were principals in Coadum Advisors and operated the hedge fund Coadum Capital. The funds invested in Coadum Capital by various investors were never invested properly and as a result, Repke and Jeffrey appropriated roughly $20 million of said funds. The attorneys at Eccleston Law are actively seeking investors who have suffered losses in investments sold through Coadum Capital.

Thomas Repke and James Jeffrey drew in hundreds of investors and gathered a total of $30 million into an array of investment funds between 2005 and 2008 to their hedge fund Coadum Capital. Repke and Jeffrey allegedly instructed investors to transmit their funds to multiple so-called “escrow” accounts. Once the funds were transferred to these accounts, Repke and Jeffrey would then further transfer the money to offshore accounts allowing them to illicitly profit more than $20 million.  Repke and Jeffrey allegedly falsified investment statements that were sent out to investors. These statements reported investors had earned between 3% and 7%.  

Repke and Jeffrey allegedly used the funds they acquired on various expenses; $10 million was used towards their business and to pay themselves while $500,000 was used to pay both Repke and Jeffrey in cash over a course of two years.

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 substantial losses investing with Coadum Capital, your losses may be recoverable through securities arbitration. Please contact Jim Eccleston at the Eccleston Law Offices at 312-223-0000 to discuss your recovery options.

Breaking News: Raymond James Acquires Morgan Keegan

Raymond James announced that it has entered into a definitive stock purchase agreement to acquire Morgan Keegan for approximately $930 million.  Morgan Keegan is believed to have upwards of 1,200 financial advisors who may be considering their options.

If you are an adviser at Morgan Keegan and are considering a transition as a result of this acquisition, please contact Eccleston Law for a FREE, no obligation consultation to discuss your options. 
Eccleston Law Offices assists advisers nationwide in their transition.  Working with recruiters nationwide, we negotiate the non-numbers parts of the deal, including the employee forgivable loan terms and the employment agreement. If you are a Morgan Keegan adviser contemplating a transition, or a recruiter with a candidate, contact Jim Eccleston at 312-332-0000.