Why Privately Traded REITS Are Too Risky For Most Retirees
Not all investments are suitable for everyone, which is why your broker-dealer has a duty to only recommend and sell financial products that are the right fit for you given your age, risk tolerance level, financial goals, and investing experience. Older investors, including retirees, are especially susceptible to devastating consequences from high-risk, unsuitable investment recommendations. If you are a retiree who suffered significant financial losses that you suspect may be due to broker misconduct or negligence, you should contact Shepherd Smith Edwards and Kantas REIT Investment Fraud Lawyers (InvestorLawyers.com) today.
Older Investor Files FINRA Lawsuit Against FSC Securities and Louisiana Broker Craig Accardo
Recently, our savvy REIT investment fraud lawyers filed a Financial Industry Regulatory Authority (FINRA) arbitration claim against FSC Securities and its Louisiana broker Craig Gerard Accardo on behalf of our client, who is an older investor. In her FINRA lawsuit, she is requesting up to $500K in damages and accusing the broker-dealer of recommending high-risk products, including privately traded real estate investment trusts (REITs) and business development companies (BDCs) that are generally bad investments for many people in her stage of life.
This senior investor contends that she entrusted the respondents with her life savings and other assets and was very clear with them about not wanting to take on undue risk. Instead, FSC Securities financial advisor Craig Accardo allegedly concentrated her account with obscure illiquid and private products. She is also alleging misrepresentations and omissions, negligence, gross negligence, and other broker misconduct claims against them.
This is not our only FINRA arbitration claim against FSC Securities for allegedly unsuitably recommending investments to customers.
Also, Accardo and another fellow FSC Securities broker, Frank Briseno, co-operated Nettworth Financial Group. Their New Orleans investment advisory firm, which may now be shuttered, is accused of defrauding many retirees by allegedly unsuitably selling them real estate investment trusts from which they earned high commissions. As the broker-dealer with which they are both registered, FSC Securities had a duty to properly supervise their activities in clients’ accounts to ensure investments were suitable for each customer.
What Are Privately Traded REITs and Why Can They Open Up Retirees to Investor Losses?
This type of real estate investment trust is also a private placement investment. They are not required to be registered with the US Securities and Exchange Commission (SEC), which means that the latter does not regulate them or require that they submit annual financial statements. Private REIT shares cannot be found on any public securities exchange markets. Because of this, there is not much performance information that investors can access.
Granted, there are benefits to investing in privately traded REITs, including the potential of high dividend yields, a lack of daily market fluctuations, and low compliance costs. However, private REITs are only supposed to be suitable for institutional investors or accredited investors who meet a certain income threshold minimum and are experienced investors. Involving real estate ventures and start-ups, these REITs are typically illiquid and require high minimum investments. They also usually charge hefty commissions and fees, including an upfront fee that has been known to go as high as 15%.
A Couple of Other Key Investment Risks Involving Private REITS:
- They may not be vulnerable to fluctuations in the market, but they can still drop in price.
- While many private REITs are supposed to either become publicly listed on a certain date or go into liquidation and give investors their money back, the process for the latter could take years.
Most older investors are reluctant to take on too much risk. They are often conservative investors and a lot of them have limited investing experience. Often, retirees don’t have new sources of income to depend on should their investments fail. Some may not have the luxury of too many years to wait for their private REIT to liquidate. Yet there are brokers who continue to recommend private REITs to older, conservative customers. The high commissions and fees that brokerage firms and their registered representatives stand to earn from these sales may purportedly be an incentive.
Why Hire Our Skilled Elderly REIT Investment Fraud Lawyers?
Over the years, Shepherd Smith Edwards and Kantas have represented many older investors and retirees in pursuing and recovering damages from their broker-dealers and financial advisors. We know how to identify the signs indicating that a broker has been negligent or fraudulent with an elderly investor’s money. Unfortunately, older customers remain a favorite target of brokers seeking to take advantage of their nest eggs with the latter making unsuitable investments, overconcentrating their brokerage accounts, charging excessive fees for retirement plan management, or defrauding retirees outright. Some financial advisors may be brazen enough to involve retirees in Ponzi scams and other kinds of investment fraud.
Should we agree to work together, our knowledgeable retirement loss lawyers will file a FINRA lawsuit on your behalf and represent you during the arbitration proceedings. To schedule your free, no-obligation case consultation with our REIT Investment Fraud Lawyers, call (800) 259-9010 today. We work with older investors throughout the United States.