By: Courtney Werning
According to the recent annual report filed with the SEC by Ladenburg Thalmann
Financial Services, Inc., which owns Securities America, the Pennsylvania
Department of Banking and Securities requested that Securities America
provide information concerning purchases of non-traded REIT securities
by Pennsylvania residents since 2007.
Last year, Securities America was one of several independent broker-dealers
to reach settlements with the Massachusetts Securities Division in which
they agreed to pay millions of dollars of restitution to clients who bought
non-traded REITS from 2005 to 2013. According to the Massachusetts Securities
Division consent order, Securities America was selling non-traded REITS
in excess of the Massachusetts concentration limits. Massachusetts has
a rule that an investor's purchase of REITs cannot be more than 10%
of that person's liquid net worth. Securities America agreed to pay
$8.4 million in restitution to clients and was fined $150,000 by the Massachusetts
real estate investment trust, or REIT, is a corporation, trust or association that owns and/or manages
income-producing real estate. REITs pool the capital of numerous investors
to purchase a portfolio of properties—from office buildings and
shopping centers to hotels and apartments—which the typical investor
might not otherwise be able to purchase individually.
FINRA has issued an investor alert for non-traded REITS, warning investors
of the numerous complexities and risks these investments carry that are
often not disclosed to them at the time of purchase, including:
- Distributions are not guaranteed and may exceed operating cash flow. Deciding
whether to pay distributions and the amount of any distribution is within
discretion of a REIT's Board of Directors.
- Distributions and REIT status carry tax consequences.
- Lack of a public trading market creates illiquidity and valuation complexities.
- Early redemption is often restrictive and may be expensive.
- Diversification is limited, and there are risks associated with both the
real estate market as a whole and any specific subset of the real estate
market on which a particular REIT concentrates.
Non-traded REITs are rarely, if ever, suitable for short-term investors,
and even long-term investors must be willing to bear the risks of illiquidity.
In most instances the only way for an investor who suffered losses in
non-traded REITs to recover those losses is to file claims through FINRA
At Meyer Wilson, we have successfully handled many REIT cases and recovered
a substantial amount of money for our clients in these cases. If you believe
you have suffered losses in a non-traded REIT due to a broker's misconduct,
contact us to discuss your case or complete the online form on the top
of this page and we will respond promptly.
Read more on our blog about REITs:
REIT Losses Attract Attention from FINRA
Non-Traded REITs Too Risky for Most Investors, Says FINRA
Story Serves As Cautionary Tale Against Non-Traded REITs