Finra warned investors that if the interest rates rise – as most pros expect – bond investors could be slammed by long duration, writes Dan Jamieson in a Feb. 14th., 2013 article for InvestmentNews.com

FINRA, the Financial Industry Regulatory Authority Inc. in an investor alert, told investors that in the event of rising interest rates, “outstanding bonds, particularly those with a low interest rate and high duration may experience significant price drops.”

FINRA gave the example of a bond fund with 10-year duration will decrease in value by 10% if rates rise one percentage point, the alert warns.

FINRA added that bond-fund investors can find measures of duration in a bond fund’s fact sheet, and individual bond investors can check with their investment professionals, the bond’s issuer, or they can use an online calculator to get the figure.

Short duration doesn’t mean risk-free, the alert says.

“Bonds and bond funds are subject to inflation risk, call risk, default risk and other risk factors,” the warning says.

Bonds are not without risk, however in many instances bonds are presented as the safe alternative.

If you find yourself in this position, call Soreide Law Group for a free consultation on how to potentially recover your financial losses: 888-760-6552.

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Securities Lawyer, Lars Soreide of Soreide Law Group, PLLC, recently announced that he is investigating claims against Linsco Private Ledger (LPL Financial) for investors who have suffered losses by former LPL broker Alberto Neira.

The clients of former LPL representative Alberto Neira were solicited to invest in the now defunct Silver Oak Leasing – a business operated by Alberto Neira that was allegedly engaged in the financing of luxury cars in Southern California. These clients suffered a complete loss on their investment in Silver Oak Leasing.

FINRA, the Financial Industry Regulatory Authority, permanently barred Albert Neira in December, 2012, for defrauding at least fourteen investors, many of whom were LPL customers at the time they were solicited to invest in Silver Oak Leasing. This is also known as a selling away scheme. The following passage is from FINRA’s website: “Between July 1, 2008, and January 18, 2011, Respondent (Neira) made recommendations that resulted in over $2 million in investments in Silver Oak to at least 14 firm customers. These investments included stock and promissory notes. The customers understood that the invested funds were to raise money for the general use of Silver Oak’s business enterprise. The sales were conducted privately and not through Respondent’s employing firm. Respondent failed to disclose these securities transactions to his firm.”

If you invested in Silver Oak Leasing with broker, Alberto Neira, or with LPL Financial, call Soreide Law Group at: 888-760-6552, or you may visit our website and complete the online form at: http://www.securitieslawyer.com.

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Last week LPL Financial Holdings agreed to pay $2.5 million in fines and restitution for improperly supervising brokers who sold non-traded real estate investment trusts. (Please note that LPL neither admitted nor denied wrongdoing.) These non-traded REITs are high-yielding and very popular. These non-traded REITs have jumped about 50% since 2009, to $65 billion. They are difficult to track and value, since they don’t trade on public exchanges.
Below is a list of REITs, some of which LPL Financial Holdings were fined for allegedly selling with improper supervision to clients who were not interested in taking the risks with their conservative portfolios.

American Realty Capital Daily Net Asset Value, Inc.
American Realty Capital Global Trust, Inc.
ARC Retail Centers of America
American Realty Capital Trust IV, Inc.
ARC Healthcare Trust
American Realty Capital Phillips Edison
Shopping Center REIT
American Realty Capital Trust, Inc. Update
American Realty Capital New York Recovery REIT
ARC Property Trust, Inc.
Arciterra National REIT, LP
Behringer Harvard Multifamily REIT II, Inc.
Bluerock Enhanced Multifamily Trust, Inc.
Carter Validus Mission Critical REIT
Clearwater Opportunity REIT
CNL Global Growth Trust, Inc.
CNL Global Income Trust, Inc.
Cornerstone Core Properties REIT, Inc.
Hines Global REIT, Inc. 2012
Inland Real Estate Income Trust, Inc.
Inland Diversified REIT
Lightstone Value Plus REIT II Update
NetREIT Dubose Model Home REIT, Inc.
NetREIT $200,000,000 Stock Offering Update
O’Donnell Strategic Industrial REIT, Inc.
Preferred Apartment Communities, Inc.
RREEF Property Trust, Inc.
UCM US RMBS Opportunity REIT, Inc.
US Apartment Investors 2010, Inc.
Wells Core Office Income REIT

If you purchased these or other REITs, and sustained investment losses due to your stock broker or financial advisor’s recommendations, call Soreide Law Group, PLLC, for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website and complete our online form at: http://www.securitieslawyer.com.

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In an article in the Wall Street Journal, Feb. 11, 2013, Matthew Heimer writes that ever since the Federal Reserve started pushing interest rates to new lows, it’s been a common theme for retirees and other conservative investors accepting more risk to get a decent income from their portfolios. Last week LPL Financial Holdings agreed with state regulators to pay $2.5 million in fines and restitution for improperly supervising brokers who sold non-traded real estate investment trusts. (LPL neither admitted nor denied wrongdoing.) Non-traded REITs are high-yielding and popular – assets invested in the product have jumped about 50% since 2009, to $65 billion. But they’re for investors to track and value, since they don’t trade on public exchanges.

As Nathaniel Popper reports this week in the New York Times, opaque investments are becoming increasingly popular with less-sophisticated investors, leaving the investors overexposed to risks they don’t understand or vulnerable to fraud. The Financial Industry Regulatory Authority (FINRA) recently issued a notice expressing concern about products like these that could prove “potentially unsuitable and otherwise problematic for retail investors.” Other investments on FINRA’s list include business development companies, which invest in the debt of small privately held businesses, and private placement securities, which represent direct investments in such firms.

If you sustained investment losses due to your stock broker or financial advisor’s recommendations regarding non-traded REITs, private placements, or other complex products, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website and complete our online form at: http://www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Financial regulators are confronting investor frauds that are giving retirement savers steep losses on complex products that until a few years ago were aimed only at the most sophisticated investors, writes Nathaniel Popper in a New York Times article from Feb. 11, 2013.

These victims are among the millions of Americans whose mutual funds and stock portfolios fell in the financial crisis, and who started searching for ways to make better returns. Many investors put money into speculative bets promoted by aggressive financial advisers. These investments included private loans to young companies and shares in bundles of commercial real estate properties.

“Since the crisis, we’ve seen more and more people reaching out into different types of exotic investments that are a big concern to us,” said William F. Galvin, the Massachusetts secretary of the commonwealth.

Wednesday, Feb. 6th., 2013, Mr. Galvin’s office ordered one of the nation’s largest brokerage firms, LPL Financial, to pay $2.5 million for improperly selling the real estate bundles, known as nontraded REITs, or real estate investment trusts, to hundreds of Massachusetts residents from 2006 to 2009, in some cases overloading clients’ accounts with them.

J. Bradley Bennett, chief of enforcement at the Financial Industry Regulatory Authority, or FINRA, said that for the last two years, 10 staff members have looked at the “proliferation of these products, to understand how they are being sold.”

“It’s got our attention,” he said. “We recognize the trends.”

Brokers are eager to sell these investments because they often bring in higher commissions. Several of these products hold out the promise of higher returns. Many of the investors in these complex products have filed claims with FINRA.

Private placements have been on the list of top enforcement concerns published by the national organization of state securities regulators every year since 2007. The private placements are supposed to be available only to wealthy, sophisticated investors, but several loopholes have allowed them to end up in the portfolios of less sophisticated retirement savers.

REITs have been one of the most heavily sold products. The new version, nontraded — the type that got LPL Financial in trouble in Massachusetts — can be bought and sold only in private transactions.

The outstanding amount of such nontraded REITs grew to $65 billion last year, from $43 billion in 2009. FINRA also issued a $14 million fine in October against David Lerner Associates, a large purveyor of nontraded REITs in the New York area.

If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations regarding non-traded REITs, private placements, or other complex products, call for a free consultation on how to potentially recover your losses. To speak with an attorney call 888-760-6552, or visit our website and complete our online form at: http://www.securitieslawyer.com.

Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.

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Crystallex has commenced a proceeding under chapter 15 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware in order to ensure that relevant CCAA orders are enforced in the United States. Many stock brokers recommended CRYXF to their clients as an undervalued mining company that is poised for a big jump. This investment may not have been suitable for conservative investors. If your stock broker recommended a significant investment into Crystallex recently you may be able to recover some or all of your investment losses.

On December 23, 2011, Crystallex received an initial order from the Ontario Superior Court of Justice granting CCAA protection until January 21, 2012. Proceedings by creditors cannot be continued or commenced without the consent of the Company and Ernst & Young Inc. (the Monitor) or leave of the Court. The Court extended the stay until March 23, 2012. The Court approved the terms of an interim bridge loan for Crystallex in the amount of US$3.125 million. The bridge loan is a secured, short term loan, due the earlier of April 16, 2012 or the first draw on a debtor-in-possession (“DIP”) financing facility, and is intended to provide the Company with working capital while it continues to pursue DIP financing and progress its arbitration claim.

Crystallex International Corporation is a Canadian based mining company, with a focus on acquiring, exploring, developing and operating mining projects. Crystallex has operated an open pit mine in Uruguay and developed and operated three gold mines in Venezuela.

Call (888) 760-6552 if your stock broker recommended you purchase Crystallex CRYXF.

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In an article, Feb. 7, 2013, in the New York Post, it was reported that (broker-dealer owner), Anastasios “Tommy” Belesis’ firm, John Thomas Financial, is being investigated by the FBI, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority Inc. (FINRA).

Mr. Belesis has made many media appearances on cable business/financial shows.

According to FINRA’s BrokerCheck, S.W. Bach & Co. fired him in 2005 for “inaccurate representation of identity to customer.” In 2001, a client sued him and a firm for $750,000 for churning and a FINRA arbitration panel later awarded the client $259,000. Mr. Belesis and firms he’s worked for have settled two other FINRA arbitration claims for nearly $100,000. Belesis paid $46,000 as his share of the settlements.

John Thomas’ FINRA record shows failures to disclose fees to clients about transaction charges. Arkansas Securities Department fined John Thomas $25,000 last year for allegedly not disclosing to clients handling fees for stock orders. The Connecticut Banking Department fined the firm $20,000 over similar failures on fee disclosures, and FINRA fined it $275,000 for “postage and handling” violations.

If you have been a client of Anastasios “Tommy” Belesis, and/or his firm, John Thomas Financial, and experienced financial losses call a securities lawyer at (888) 760-6552 or visit http://www.securitieslawyer.com.

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In a FINRA NTM 13-07 posted last Thursday on its website, FINRA asked for comment on an updated proposal that would keep the 5% guideline in place.

The action follows complaints about an earlier proposal to eliminate the 5% rule for markups and markdowns.

In other words, any FINRA broker/dealer can make up to 5% commission on the front and back end of every trade. This “commission” is hidden on the order ticket called a mark up. Many investors look at the transaction fee which is a usually a low flat consistent fee that they see on every ticket. A mark up is when firms add a cost to the price per share that is their profit. Look for it at the bottom of the order ticket in fine print where it will tell you the per share mark up and multiply by the number of shares you bought and suddenly the $25 you thought you were paying per trade just shot up to over $1,000.00. Yes, the industry is in it to make money for themselves, not for you.

“A majority of the comments received on the initial proposal opposed the elimination of the 5% policy,” FINRA said in the notice. “These commenters stated that the 5% policy generally has been effective in regulating broker-dealers for over 70 years and eliminating it would reduce investor protection.” It is only logical that the industry will oppose what keeps them rich and the investors poor.

In its initial proposal — floated nearly two years ago — FINRA had promised updated guidance to replace the 5% threshold, but commenters warned against eliminating it without setting a new standard.

Nevertheless, industry attorneys don’t like the old 5% limit, which dates from 1943.

It’s really is sending a bad message to member firms that a 5% markup or markdown is generally OK.

FINRA examiners actually use something closer to a 2% to 3% markup, observers say, and FINRA has consistently said the 5% rule is a guideline only.

“It’s like charades; you don’t know what they’re looking for,” Ms. Baird said.

If you have been charged excessive mark ups or mark downs call a securities lawyer at (888) 760-6552 or visit http://www.securitieslawyer.com.

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Those investors who believed they had constructed a “conservative” portfolio by being heavily invested in bonds could be reclassified as “aggressive.” Some also believe the move may be an attempt by the firm to lessen its liability in the event clients who are holding large positions in bonds decide to take legal action against UBS.

Mike Ryan, the chief investment strategist for UBS, said so-called “non consent” letters will be sent out to investors in the coming weeks alerting them of their changed classification – but he says it has little to do with a firm-wide bias against bonds. Rather, UBS is changing “its long-term view” reflecting what it views as a “volatile market…not just in fixed income.”

The Federal Reserve at some point will have to raise short-term interest rates (currently close to 0%), and end its quantitative easing program, which involves the Fed’s purchase of government bonds, which helps depress long-term interest rates and prop up bond prices (yields move in the opposite direction from price). Once this process starts, “conservative” investors with long bond positions will suffer devastating losses or be forced to hold to maturities of which can be decades down the road.

Bonds also carry credit risk and can default if the underlying company can no longer satisfy its obligations. Bonds are not without risk, however in many instances Bonds are presented as the safe alternative.

If you find yourself in this position, call for a free consultation on how to potentially recover your financial losses: 888-760-6552.

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There are many real estate investors attracted to Tenant-In-Common (TICs) for the purported tax savings through the like kind exchange provisions in the IRS code Section 1031, which allows for the investor a deferral of capital gains. Up until 2013, the capital gains rate was only 15%. Investors need to calculate the net amount of real estate that they are actually acquiring when they buy a Tenant-In-Common investment because many times it is less than 80% and the investor would net more money by paying the taxes.

Also, a factor to consider is that a TIC investment is really just a creative way to finance a real estate transaction that results in 1031 investors acquiring significantly more real estate than they needed to accomplish the like kind exchange. For example, if an investor sells 2 multi-family units and has $500k in proceeds, all the investor needs to do is purchase $500k or more in like kind real estate to qualify under section 1031. However, many TIC deals are highly leveraged and the $500k they use to buy into the property is usually encumbered by a pro rata share of a mortgage, which is typically 3 times the investment and the investor will end up with 4 times the amount of real estate they need to effectuate their 1031 exchange.

Securities Lawyer, Lars Soreide, points out that, “One of the errors investors make in TIC cases is to assume that the unit value of the investment equals the property value divided by the units.” When TIC cases are litigated, “many of these cases bog down in property valuation when in reality the issue in not the property value but the investment value, which is next to worthless even if the property has residual value. Think of this way, who would buy a unit in this investment given that the purchaser would have to take on 150% on additional debt, give up all property rights to become a tenant in common that is worthless as collateral and cannot be turned into cash? Given the structure of ownership with loans with covenants signed by the sponsor and cross collateralized usually, property value is secondary in these cases.” Often these investments are sold by a stock broker or financial adviser because a Tenant-in-Common Investment is a security. In a FINRA arbitration, “often Respondents/Defendants put on an appraiser to prove the property value, but there is an objection on relevance of this testimony because the appraiser does not opine on the market value of the security on the notional value of the unit which is usually not much at all if anything,” says Soreide. It is “critical to obtain the principal loan documents and assumption agreements to ascertain how encumbered and how much real estate you actually own.”

Soreide Law Group represents investors nationwide in Tenant-In-Common (TIC) cases before the Financial Industry Regulatory Authority. For a free consultation on how to potentially recover your financial losses call: 888-760-6552. More information on TICs and FINRA Arbitrations can be found on http://www.securitieslawyer.com.

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