{"id":1242,"date":"2013-05-06T16:54:17","date_gmt":"2013-05-06T16:54:17","guid":{"rendered":"https:\/\/www.stockbrokerfraudblog.com\/2013\/05\/finra_notifies_brokerage_firms"},"modified":"2022-05-03T15:29:36","modified_gmt":"2022-05-03T20:29:36","slug":"finra-notifies-brokerage-firms","status":"publish","type":"post","link":"https:\/\/www.investorlawyers.com\/blog\/finra-notifies-brokerage-firms\/","title":{"rendered":"FINRA Notifies Brokerage Firms About Non-traded REIT Information that Can Mislead Investors"},"content":{"rendered":"

The Financial Industry Regulatory Authority is alerting broker-dealers that the way they market certain non-traded real estate investment trusts could be misleading investors. The regulator said its recent reviews of brokerage firm communications with the public about these investments showed “deficiencies.” The SRO has been trying to improve the sales practices related to illiquid REITs and increase their transparency.<\/p>\n

Among the identified information shortcomings: <\/strong>
\n\u2022 Inaccurate and misleading statements about the benefits of investing \u2022 Failure to adequately explain the risks involved \u2022 Describing a real estate security as a “yield,” which can incorrectly suggest that it is a bond
\nFINRA said it is necessary for brokerage firms to provide “fair and balanced” distribution rates, while explaining that distribution payments are not a given. The regulator observed that some broker-dealers are prone to highlight these payments, which are given to investors as soon as the nontraded REITs are sold, but fails to inform that some distributions are the return of their principal or borrowed money. FINRA reminded broker-dealers that they have to wait until an REIT has paid distributions for six months before it can make claims about the instrument’s yearly return rate.<\/p>\n

The SRO noted that data about related or affiliated REITs should be as prominently visible as other information, and past performance information about REITs involving the current investment being promoted cannot be cherry picked.<\/p>\n

REITs and Non-traded REITs<\/strong>
\nREITs invest in commercial real estate, which gives investors a chance to benefit from the increase in property values, and they are publicly traded. Non-traded REITs, which don’t trade on securities exchange, can be tough to sell in secondary markets or illiquid. Investors usually have to pay higher fees for them.<\/p>\n

FINRA has been targeting the improper-sale of non-traded REITs for some time now. This latest notification to brokerage firms doesn’t mention how many broker-dealers it looked at (or which ones) to reach its conclusions.<\/p>\n

Our REIT lawyers represent investors throughout the US. For over two decades, Shepherd Smith Edwards and Kantas, LTD LLP has helped thousands of investors recoup their investment losses by going through arbitration via FINRA, NYSE, NASD, and AAA, as well as through the state and federal courts.<\/p>\n

FINRA Provides Guidance on Communications With the Public Concerning Unlisted Real Estate Investment Programs<\/a>, FINRA.org (PDF)<\/p>\n

More Blog Posts:<\/strong>
\nMajority of Non-Traded REITs Underperform Compared to Benchmarks, Reports New Study<\/a>, Stockbroker Fraud Blog, August 25, 2012
\nPrivate REITs: The Need for Tougher Oversight?, Institutional Investor Securities Blog, June 28, 2011
\nApple REIT Arbitration: FINRA Rules Against David Lerner Associates in First of Hundreds of Cases<\/a>, Stockbroker Fraud Blog, May 26, 2012 Continue Reading \u203a<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Financial Industry Regulatory Authority is alerting broker-dealers that the way they market certain non-traded real estate investment trusts could be misleading investors. The regulator said its recent reviews of brokerage firm communications with the public about these investments showed “deficiencies.” The SRO has been trying to improve the sales practices related to illiquid REITs […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[3739,4014,3759],"tags":[],"class_list":["post-1242","post","type-post","status-publish","format-standard","hentry","category-finra","category-non-traded-reits","category-reits"],"yoast_head":"\nFINRA Notifies Brokerage Firms About Non-traded REIT Information that Can Mislead Investors — Investor Lawyers Blog — May 6, 2013<\/title>\n<meta name=\"description\" content=\"The Financial Industry Regulatory Authority is alerting broker-dealers that the way they market certain non-traded real estate investment trusts could be — May 6, 2013\" 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