Broker-dealers’ falling short in due diligence when selling complex, illiquid products has been a focus of FINRA examinations and fines since the market collapse of 2008, writes Bruce Kelly of InvestmentNews.com. FINRA recently fined and sanctioned a handful of broker-dealers that sold two series of private placements that imploded in 2009 — Medical Capital Holdings Inc. notes and preferred shares of Provident Royalties LLC.

This according to comments made last Thursday by Susan Axelrod, executive vice president of member regulation sales practices at FINRA. “In several instances, FINRA examiners have found that firms selling these products failed to conduct reasonable diligence before selling a product and failed to make a determination that the product was suitable for investors.”

“Finra examiners have noted that in the instances of REITs that have experience financial difficulties, red flags existed and should have been considered by firms prior to the product being offered to firm clients,” according to Ms. Axelrod’s prepared comments to the Securities Industry and Financial Markets Association’s Complex Products Forum, which was held in New York.

Ms. Axelrod said that distributions, or dividends, of nontraded REITs are on FINRA’s radar.

“Nontraded REITs may also borrow funds to make distributions if operating cash flow is insufficient,” she said. “And excessive borrowing may increase the risk of default or devaluation. In addition, nontraded-REIT distributions may actually be a return of principal,” she said.

Susan Axelrod added that financial advisers, therefore, “must use caution when discussing distributions with investors, particularly when making comparisons to other dividend-paying investments.”

“FINRA examiners are also reviewing advertising, sales literature and correspondence between brokers and investors, and — in some instances — have found misrepresentations of product features, such as distributions and share values,” she said. “All of these issues raise investor protection concerns.”

(Nontraded REITS = Nontraded real estate investment trusts)

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, represents clients nationwide. For a free consultation on how to potentially recover your financial losses call: 888-760-6552, or you may visit our website and complete the online form at: http://www.securitieslawyer.com.

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LaeRoc Funds are real estate ‘private placements’ sold by various broker/dealers. LaeRoc Funds, a real estate investment firm, manages over $650 million in assets. LaeRoc 2005-2006 Income Fund, L.P., is trying to raise enough money to pay off debt due to the decline in real estate ventures. June, 2011, the Fund issued a cash call to investors who purchased the LaeRoc 2005-2006 Income Fund. A cash call is often a red flag for investors.

A notice of dissolution has been issued to investors in the LaeRoc 2002 Income Fund, L.P. Several properties in the LaeRoc Funds are in financial distress, consequently depressing the value of the Funds.

These investments may have been represented to the investor as low risk or conservative. If you feel that the investments may have been misrepresented to you, the conservative investor, we would like to speak to you.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, represents clients nationwide. For a free consultation on how to potentially recover your losses call: 888-760-6552, or you may visit our website at: http://www.securitieslawyer.com.

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Did your broker/dealer sell you, an unaccredited investor, private placements in Breakthrough Ventures? Soreide Law Group is currently investigating claims against the brokers who sold these private placements to clients in the United States and Europe. This private placement may not be suitable for some investors, especially the more conservative investor, not willing to take risks with their portfolio. Your broker/dealer should have made you aware of the riskiness of such investments. Soreide Law Group would like to speak to you regarding your investment in Breakthough Ventures. 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.

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Soreide Law Group is currently investigating the sale of shares in Club 50, Inc., through a private placement offering by various FINRA registered broker dealers. Club 50 Inc., is located at 360 South Center Street, Suite 500, Reno, Nevada 89501. If your broker/dealer sold you this private placement, offering it to you as a “safe” investment, not making you aware of their risks, we would like to speak to you. To purchase this investment you must have been an accredited investor having a net worth of over $1 million or an annual income of over $200,000. Even if you do qualify, these investments may also not have been suitable for your portfolio. Private placements can carry risk, and that risk should be made know to the investor before purchase.

Soreide Law Group, PLLC, represents clients nationwide. Call for a free consultation on how to potentially recover your private placement financial losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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Soreide Law Group is currently investigating claims by investors of ICON Leasing Fund Eleven, LLC. ICON Leasing Fund Eleven purchases, and leases equipment to third parties in the United States, Canada, and Europe. It also provides financing. This fund was founded in 2004.

As with any private placement, investments in ICON Leasing Fund Eleven involve risk. Allegedly, some brokers/dealers sold the investment to their clients for the relatively high commission, and may have failed to report the possible risks to their clients who did not want such high risk investments in their portfolios.

If you were sold ICON Leasing Fund Eleven by your broker/dealer, 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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The Securities and Exchange Commission (SEC) voted yesterday to allow the issuers of private securities, such as hedge funds, to advertise their offerings and make solicitations to the public writes Dan Jamieson for InvestmentNews.com. This rule change is mandated under the “Jumpstart Our Business Startups Act.”

Solicitation and advertising of private offerings, which would include the posting of information about deals on websites, would be allowed only when the product is sold to accredited investors.

Under Section 501 of SEC Regulation D, to be an accredited investor, a person must have an individual net worth, or joint net worth with a spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person. Alternatively, a person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years may be considered accredited.

Jamieson writes that the rule proposal did not specify what methods issuers must use to ensure they sell only to accredited investors. Such verification methods “would be impractical and potentially ineffective,” the SEC staff said in a release.

The regulator is proposing that the issuers consider the type of purchaser and what they know about them, how the investor was solicited and the terms of the offering, such as minimum investment. Observers have been debating exactly how such verifications should work.

The InvestmentNews.com article adds that the issuers have been urging the SEC to allow them to continue using signed statements from investors who claim they meet accreditation standards. State securities regulators are pushing the agency to require substantiation of financial status, such as tax and income records.

The commission had planned last week to implement immediately effective rules allowing solicitation of private products, but the Chairman backtracked on that idea after state regulators and investor groups complained about not having the normal 30-day comment period to air their views. That change of heart caused friction among the commissioners.

Soreide Law Group, PLLC, represents clients nationwide. Call for a free consultation on how to potentially recover your financial losses. To speak with an attorney call 888-760-6552, or visit our website at: http://www.securitieslawyer.com.

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The Soreide Law Group, PLLC, is currently investigating claims by investors of the Thompson National Properties 12 Percent Notes Program a/k/a TNP 12 Percent Notes. Thompson National Properties LLC, have suspended interest payments to investors in a private placement sold to raise capital for the firm. Thompson has suspended interest payments on the Thompson National Properties 12 Percent Notes Program. The TNP 12 Percent Notes Program raised $21.5 million from 418 investors in 2008 and 2009, according to a filing with the Securities and Exchange Commission (SEC).

These notes were sold as conservative investments often times to clients who were elderly or retired, and did not wish to have risky investments as part of their portfolios.

If you were sold Thompson National Properties (TNP) 12 Percent Notes Program by your broker/dealer, 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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Tsarina Lau Branyan (CRD #5628096, Registered Representative, Huntington Beach, California)

has been fined $7500.00 and was suspended from associating with FINRA members in any capacity for 20 business days.

This fine is payable when Branyan re-enters the securities industry. These sanctions were based on FINRA’s findings that Branyan sold, or participated in the sales of, securities without being registered.

The findings stated that Branyan did not hold any FINRA licenses when she sold or participated in the sale of approximately $1 million of private placement securities to customers.

 The suspension was in effect from May 7, 2012, through June 4, 2012.

(FINRA Case #2010022715608)

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Glenn Loren Halpryn (CRD #1633028, Registered Principal, Aventura, Florida) 

submitted a Letter of Acceptance, Waiver and Consent in which he was censured and fined $10,000.

Without admitting or denying the findings, Halpryn consented to the described sanctions and to the entry of findings that he caused funds raised from a private placement offering to be used for due diligence on an unrelated prospective business venture.

Although Halpryn later repaid the funds to the company, he caused them to be used in a manner inconsistent with the terms of the offering.

(FINRA Case #2010025076001 )

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Soreide Law Group, PLLC, is currently investigating Cawley Fund I, LLC Private Placement, and Cawley Fund II.

If you or a loved one have suffered a loss by investing in these private placement funds, we may be able to help you recover your losses.  Your broker or financial advisor may have recommended this fund to you, or other investments, putting you at risk, possibly for the high commission it paid to them.

Securities Lawyer, Lars K. Soreide, of Soreide Law Group, PLLC, has represented clients nationwide. If you or a family member have sustained investment losses due to your stock broker or financial advisor’s recommendations, 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 at: www.securitieslawyer.com.

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