Broker Investigations

Broker Investigations: 

If you invested in any of the following, please contact us for a free consultation
Private Equity Investment List

HMS Income Fund, Inc. (BDC)

Master Private Equity Fund, LP

Sierra Income Corporation (BDC)

ARC Business Development Corporation of America Update

Berkeley Capital Trust, Inc.

FS Energy & Power Fund (BDC)

Gaines-Gentry Breeding & Racing, LLC

Galleon Ventures, LLC

Keating Capital, Inc.

Master Private Equity Fund LP

Pagoda Pharma Group, Inc. Offering

Sage Harbor – Ameritech Preferred Investors

Sage Harbor – KEG Land Investors, LLC

Sage Harbor – Surprise Prep School Update

Unity Resources, LLC-Emerald Royalty Fund

Unity Resources, LLC-Opinion Update

The Golfers Company Common Stock Offering

Virtus Real Estate Capital Fund, LP

Waveland Vestara Notes

Zea Capital Fund, LLC

REIT Investments

Medical Hospitality Group, Inc.

American Realty Capital Daily Net Asset Value, Inc.

ARC Retail Centers of America

American Realty Capital Trust III, Inc.

ARC Healthcare Trust

American Realty Capital Phillips Edison Shopping Center REIT

American Realty Capital Trust, Inc.

American Realty Capital New York Recovery REIT

ARC Property Trust, Inc.

Arciterra National REIT, LP

Behringer Harvard Multifamily REIT II, Inc.

Behringer Harvard 2008 Multifamily REIT I

Behringer Harvard Opportunity REIT II

Bluerock Enhanced Multifamily Trust, Inc.

Carter Validus Mission Critical REIT

Clearwater Opportunity REIT

Cornerstone Core Properties REIT, Inc.

Hines Global REIT, Inc.

Inland Diversified REIT

Lightstone Value Plus REIT II

NetREIT Dubose Model Home REIT, Inc.

O’Donnell Strategic Industrial REIT, Inc.

Preferred Apartment Communities, Inc.

US Apartment Investors 2010, Inc.

Wells Core Office Income REIT


Wells Timberland REIT

TIC/DST Offerings

ArciTerra Strategic Retail – Park Lee

Bluerock Mesa Ridge Apartments DST

PASSCO – Legends at Indian Springs

Inland Discount Retail Portfolio III

Inland Grocery & Pharmacy Portfolio DST

Inland Walgreens Pharmacy Portfolio II DST

Inland CVS Pharmacy Portfolio III DST

Inland CVS Pharmacy Portfolio IV

Inland National Net Lease Portfolio

Principle Equity National Oilwell Varco DST

Rainier Exchange Portfolio I, DST

Rancon Medical and Educational Center

REVA – Raleigh RTP, LLC 1

Salok TN, LLC

TNP 121 S. Martin Luther Blvd.

Gold Losses


Atlantic Bullion & Coin

Oil & Gas Alternative Energy Investments

Adwar Drilling Fund I, LP

APX Drilling Partners 2011, LP

APX Energy, LLC (affiliated with Campbell Energy, LLC)

Atlas Resources Series 31-2011

Atlas Series 31 and 32

ATP Oil and Gas Corp

Aztec XII Drilling Program

Barclay’s Crude Oil ETF (OIL)

Black Stone Minerals, L.P. (BSM)

Blueknight Energy (BKEP)

Bradford Drilling Associates XXXI

Bryan Limited Partnership #33

Calumet Specialty Product Partners (CLMT)

Capital Product Partners L.P. (CPLP)

Catalyst Energy, Inc.

Cheniere Energy Partners (CQP)

Ciner Resources LP (CINR)

Clearbridge MLP and Midstream Fund (CEM)

CNX Midstream Partners LP

Coachman Bakken Drilling Fund III

Cohen & Steers MLP Income and Energy Opportunity Fund (MIE)

Crestwood Equity Partners LP (CEQP)

CSI Compressco LP (CCLP)

CVR Partners LP, symbol UAN

D & L Energy 2011 Program

DCP Midstream Energy (DCP)

Delek Logistics Partners, LP (DKL)

Dynagas LNG Partners LP (DLNG)

Enable Midstream Partners LP (ENBL)

Energy Hunter Partners 2011-A, Ltd.

Enlink Midstream Partners LP (ENLK)

ETACS S&P Crude Oil (OILX)

Ferrellgas Partners, L.P. (FGP)

Foresight Energy (FELPQ)

Frontier Income and Growth LLC 2010

Genesis Energy LP (GEL)

Goldman Sachs MLP & Energy Renaissance Fund (GER)

Goldman Sachs MLP Income Opportunities Fund (GMZ)

Gulf South Energy Partners 2011-A, LP

Hard Rock Partners 2011-A, LP

Heartland Oil Investors (Heartland Production and Recovery Fund)

Holly Energy Partners LP (HEP)

ICON Oil & Gas Fund

iPath Pure Beta Crude Oil (OLEM)

Legacy Reserves LP, symbol LGCY

Madison Capital Energy Income Fund III

Madison Capital Investments, LLC

Magellan Midstream Partners (MMP)

MDS Energy Well Development 2011, LP

Mewbourne Oil & Gas

MidCon Energy Partners (MCEP)


NGL Energy Partners (NGL)

Noble Access 3 through 13 (2009 through 2012)

Noble Royalty Access Fund X

Noble Royalty Access Fund XI

Noble Royalty Access Fund XII

NuStar Energy LP (NS)

Oil States Trading Working Interest Program

Penneco PDA Programs

Plains All American Pipeline (PAA)

Proshares K-1 Free Crude Oil (OILK)

Proshares Ultra Bloomberg Crude Oil (UCO)

Resource Royalty, LLC

Rhino Resource Partners (RHNO)

Rice Drilling B, LLC

Rice Energy

Shell Midstream Partners (SHLX)

Tallgrass Energy LP (TGE)

Talos Energy (TALO)

Targa Resource Partners (NGLS-A)

Tortoise Energy (TYG)

U.S. Energy – Strategic Income Fund

United States Oil Fund (USO)

Unity Resources 11-A

US Energy Alpha Energy Partners 2011 A & B

Viper Energy Partners (VNOM)

Waveland 2011 Drilling Program

Waveland Drilling Partners 2011-A, LP

Waveland Energy Partners 2011A

Waveland Energy Partners Lease Bank Program (2009 and 2010

Equipment Leasing Income & Equity Funds

Cawley Multifamily Fund Losses

Odyssey Residential Losses

KH Funding Notes Losses

TSG Real Estate Losses

Erickson Retirement Community STAMPS

RMC Medstone Capital

Roundstone Healthcare Capital Partners Investors

Warsowe Acquisition Corp Investors

KBS Real Estate Investment Trust Inc. (“KBS REIT I”).

UBS Yield Optimization Notes Fraud

Commonwealth Opportunity Fund II, LLC

Cypress Equipment Fund A, LLC

Legacy Income Fund I, Ltd.

The Golden State Income Fund VI, LLC

Atel 14, LLC

Cawley NNN Fund I

Commonwealth Income & Growth Fund 5

Commonwealth Income & Growth Fund VII

CSV Opportunistic Debt & Equity, TALF/PPIP Fund, LLC

Cypress Income Funds 10 & 11

Cypress Equipment Funds 17 & 18, LLC

Fertile Earth Company Stock Offering Update

ICON ECI Partners I & II, LP

ICON Leasing Fund Fourteen

ICON ECI Fund Fifteen, LP

IMH Holdings / Strategic Wealth & Income Fund

Investlinc Materials Fund, LLC

Macquarie Equipment Leasing

Pacific Office Properties Trust, Inc.

Passco Companies Income Fund I

Rainier Income Fund

RJO Global Trust

TNP Vulture Fund VIII, LLC

Triton Pacific Capital Partners Fund IV

U.S. Preventive Medicine Class E Common Stock Offering

Waveland Ventures IV – Estech

Westmount All Equity Income Fund

Life Settlements

American Insurance Strategies (AIS) Fund II, LP

GWG Holdings, Inc. – Secured Debentures

GWG DLP Funding Notes Update

Q Life Fund, L.P.

Bond Losses

GWG Renewable Secured Debentures UBS Puerto Rico Fund Losses (Various) 

Detroit General Obligation Bond Losses (Various)

Real Estate Equity/Mortgage Projects/ Funds

Tenant In Common Investment Losses

Bluerock Special Opportunity & Income Fund III, LLC

Cloverfields at Eastland Center

Dominion Opportunity Fund I, LP

Premium Point – KBR (B) & (R) Fund

Thread – KBR (B) and (R) Fund

AgraShares Fund III, LLC 8/1/09

Americap Distressed Real Estate Fund I

Avere Medical Real Estate Fund I, LP

BH Capital Strategic Debt Investment Fund I, LLC

Bluerock Special Opportunity & Income Fund II, LLC

BR Senior Secured Debenture Trust, LLC

Calliance Realty Fund, LLC

Cavan Strategic Capital Growth Fund, LLC

Cawley Multifamily Fund II, LP

Clearwater – Healthcare of Florence

CM Notes Program I, LLC

DCG/UGOC Equity Fund, LLC

DeBartolo Opportunity Fund II

DeBartolo Opportunity Fund I, LLC

De Rito Opportunity Fund I, LP

DIS Neighborhood Rejuvenation Fund I


Encore Opportunity Hospitality Fund I

Epoch Properties Multi-Family Opportunity Fund, Ltd.

Epoch – Brier Creek Luxury Apts

FS Investment Corporation Follow-On

Granite Funding I, LP

Hertz Growth & Income Fund

HPF Residential Fund II

Inland Opportunity Fund II

JCAP Multi-Family Real Estate Fund, LLC

Jasper Stone Real Estate Fund IV, LP

JHFG Multifamily Opportunity Fund, LLC

VII Peaks-KBR Co-Optivist B Fund, LLC

VII Peaks-KBR Co-Optivist R Fund, LLC

Meridian Real Estate Opportunity Fund II, LLC

Meridian Southwest Healthcare Partners, LP

MPF Income Fund 27, Inc.

Northpark Real Estate Investors, LLLP Fund

PMRG Summit Real Estate Fund I, LP

Rainier Net Lease Retail Investors, LP

Redwood Opportunity Fund I, L.P.

REVA – Catalyst Fund Update

RMC Medstone Equity Fund, LLC

Roundstone Healthcare Capital, V, LP

Trinity Green Fund I, LLC

United Development Fund IV

Vertical US Recovery Fund II, LLC

Virtus Student Housing Fund

Virtus Storage Investment IV

Welsh US Real Estate Fund 2009

WNC Tax Credit Funds

Worth Investment Group

Unit Investment Trusts

Hennion & Walsh SmartTrust UIT Losses

First Trust Tax-Advantaged Municipal Closed End

First Trust Senior Loan Limited Duration Opportunities Closed-End Portfolio Series 17

High Yield Notes

Thompson National High Yield Notes

Broker Investigations: Common Types of Claims Against Brokers and Financial Advisors

When your broker recommends that you buy or sell a particular security, your broker must have a reasonable basis for believing that the recommendation is suitable for you. Therefore, in making this assessment, your broker must consider your risk tolerance and other security holdings. In addition, they must consider your financial situation (income and net worth), financial needs, and investment objectives. However, if your broker or financial advisor did not recommend investments that were suitable for a person of your age, experience, education, and risk tolerance, you may be entitled to a recovery.

The Financial Industry Regulatory Authority (FINRA) has a suitability rule – Rule 2310 which states:

(a) In recommending to a customer the purchase, sale, or exchange of any security, a member shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.
(b) Prior to the execution of a transaction recommended to a non-institutional customer, other than transactions with customers where investments are limited to money market mutual funds, a member shall make reasonable efforts to obtain information concerning:
(1) the customer’s financial status;
(2) the customer’s tax status;
(3) the customer’s investment objectives; and
(4) such other information used or considered to be reasonable by such member or registered representative in making recommendations to the customer.
(c) For purposes of this Rule, the term “non-institutional customer” shall mean a customer that does not qualify as an “institutional account” under Rule 3110(c)(4).


FINRA Rule 2310

Stockbrokers and investment advisors must follow FINRA rule 2310 and only make investment recommendations that are “suitable” for each investor. Before making any recommendation, a stockbroker must consider a customer’s age, income, and net worth. Furthermore, their liquid net worth, education, understanding of risk, ability to afford the risk, other investments, and financial needs. Most importantly, all of these factors must be considered before making any recommendations.
A broker’s failure to disclose the known or discoverable risks about a particular investment or investment strategy may be a violation of the suitability rules, resulting in actionable misconduct. However, it is not necessary that the broker intended to conceal facts from you, but only that the broker failed to discover easily discoverable facts about the investment and investor in making his recommendations. If you have been placed in unsuitable investments, you may have legal rights against your broker and the brokerage firm.
Selling Away

A stockbroker cannot sell you investments that are not sold to you by the brokerage firm. Typically, these outside investments are riskier and payout a higher commission to the broker. For instance, if your broker solicits you to purchase securities away from the brokerage firm, your broker is “selling away.” This is a violation of the Financial Industry Regulatory Rules, state securities laws, and federal securities laws. Usually, these investments are in the form of limited liability partnerships and private placements. If you are a victim of selling away, you may have legal rights against your broker and the brokerage firm.


Did your broker or financial advisor overconcentrate your portfolio into one or just a few sectors? Diversifying your portfolio helps create a buffer during turbulent economic times. Further, a broker's failure to diversify a customer's portfolio may result in an excessive amount of risk to the investor. Over-concentration of an account is rarely suitable for any investor, especially elderly customers and clients who have a low-risk tolerance. Therefore, if you have too much of one stock, one sector, or several mutual funds owning the same core holdings, you may have legal rights against your broker and the brokerage firm.

Unauthorized or Excessive Margin
Margin is when you use your own securities in your account as collateral to borrow money from your brokerage firm typically to purchase more securities. For instance, this has the effect of magnifying any profit or loss made on the securities. In addition, the securities serve as collateral for the loan. The net value, (the difference between the value of the securities and the loan), is initially equal to the amount of one’s own cash used. Also, this difference has to stay above a minimum margin requirement. To clarify, this is to protect the broker against a fall in the value of the securities to the point that they can no longer cover the loan. As a result, this creates a lending relationship with your brokerage firm.
Similar to a bank, when you borrow money, you are charged an interest rate. If the securities in your margin account decline in value sufficiently, your brokerage firm will require you to immediately deposit more collateral to secure the loan due to the decrease in the value of their collateral–the securities in the account. To clarify, this is called a margin call. When you receive a margin call, you will either have to deposit additional money into the account or additional securities. If the investor does not have additional securities or money to deposit, the firm will sell enough securities to cover the margin call and meet the required equity maintenance levels.
Furthermore, when the margin posted in the margin account is below the minimum margin requirement, the broker or exchange issues a margin call. For instance, the investor either has to increase the margin that they have deposited, or they can close out their position. They can do this by selling the securities, options, or futures if they are long and by buying them back if they are short. However, if they don’t do any of this, the broker can sell his securities to meet the margin call.
The above-mentioned scenario puts the investor at risk to lose more than the amount invested if the value of the security depreciates. In addition, the margin interest being charged only adds to the financial damage done to the investors. Lastly, this usually results in the investor owing money to the brokerage firm even after all of his positions have been liquidated.

The landmark case of Piper, Jaffray & Hopwood, Inc. v. Ladin, 399 F. Supp. 292; 1975 U.S. Dist. LEXIS 16441 (S.D. Iowa August 26, 1975), holds that “The imposition of a duty to investigate the financial capability of an investor entering a margin transaction and to inform that investor of the implications of a margin purchase can also be justified as part of a stockbroker’s professional responsibility.” If you have been put on margin without your permission, were not fully warned of the risks of investing on margin, or do not feel that it was suitable for someone of your age, experience, risk tolerance or net worth to be placed on margin you may have legal rights against your broker and the brokerage firm.


Did your broker or financial advisor excessively buy and sell securities in your account? Generally, churning is the practice of executing trades in order to generate commission for the broker or financial advisor. For churning to occur, your broker or financial advisor must exercise control over the investment decisions in your account. Churning can be a violation of SEC Rule 15c1-7 and other securities laws, worthy of broker investigations.

The Financial Industry Regulatory Authority (FINRA) has rules prohibiting churning and excessive trading. Excessive trading is the same as churning, but without the requirement that the person engaging in the trading does so for the purpose of generating commissions. Churning and excessive trading can violate FINRA Rule 2310, and FINRA Rule 2310-2(b)(2).

It is also against state securities laws and federal securities laws to churn an account. If you are a victim of churning you may have legal rights against your broker and the brokerage firm. Contact us if you're interested in broker investigations due to churning.

Did you lose money due to a stock broker or financial advisor churning your account?

Broker-client disputes typically involve allegations that a brokerage firm and its registered representative churned or excessively traded a client’s portfolio in order to generate income for the broker and the firm and/or that the client was sold investments that were not suitable given the client’s investment objectives. At the root of churning cases is the question, “Was there a reasonable probability that the securities trading would be sufficiently profitable to cover its cost?”

Economists and securities industry professionals are often called as expert witnesses to assist arbitration panels in determining whether an account has been churned and, if so, what damages have been suffered by the client. Simple ratios and rules of thumb have long served as traditional economic analyses of liability and damages issues in churning cases. However, advances in computer technology and in our understanding of financial economics now allow for more thorough analyses.

The two common indicators of alleged excessive trading in churning cases: are 1) turnover ratios and 2) cost-to-equity ratios. Turnover ratios measure how often, on average, the securities in a client’s portfolio are traded in a year. Cost-to-equity ratios measure the annual cost of the trading as a percentage of the client’s investments.

There are three common measures of damages in churning and suitability cases: 1) out-of-pocket loss, 2) benchmark portfolio or well-managed account, damages, and 3) trading costs. Out-of-pocket loss is the change in a client’s equity less any net deposits made during the period. Out-of-pocket loss is an inappropriate measure of damages because it ignores the opportunity cost of invested funds. Also, general market movements that are unrelated to the alleged fraud significantly affect the out-of-pocket measure.

The benchmark portfolio measure of damages corrects the deficiencies in the out-of-pocket loss measure. The benchmark portfolio measure of damages is the difference between what the client’s equity would have been had the portfolio been appropriately managed and the client’s actual equity at the end of the disputed period. The benchmark portfolio measure of damages is most widely used in cases where the primary allegation is that unsuitable securities were purchased for the client.

Trading costs (commissions, bid-ask spreads, mark-ups and markdowns, margin interest, and fees incurred by the client) are a widely used measure of damages in churning cases. Although not generally understood, the simple trading cost measure suffers the same flaws as the out-of-pocket loss because, like out-of-pocket losses, it ignores the opportunity cost of invested funds. Fortunately, the adjustment necessary to correct the simple trading cost measure is straightforward and closely related to the benchmark portfolio measure of damages.

False Statements & Omissions

Your broker or financial advisor cannot make false statements or omissions. If your broker or financial adviser only talked about the “upside” and how much money you are going to make, without talking about the potential risk to your money, this may constitute a material misrepresentation or omission by your broker. Your broker has a duty to disclose to you known or readily available information such as the earnings and financial health of each company's stock.

False statements often include promises about future performance, price predictions, any guarantees, and special knowledge about the performance of a particular security. Omissions are the failure to disclose known or discoverable risks about an investment. If you are a victim of false statements or material omissions you may have legal rights against your broker and the brokerage firm. Contact us for broker investigations over false statements.

Mutual Fund Fraud

Did your broker or financial advisor recommend that you purchase an overly aggressive mutual fund? Did your broker or financial advisor disclose the underlying securities owned in the funds along with the inherent risks of the fund? Did your broker or financial advisor excessively trade your mutual funds? Did your broker or financial advisor explain the difference between share classes before you purchased your mutual fund? The difference between class A shares and Class B shares is that class A shares charge a front-end sales charge and class B shares do not impose a front-end sales charge. With class B shares a contingent deferred sales charge is used which is paid to the broker at the time of the sale. If you own class B shares you are generally charged a substantially higher annual expense than class A shareholders. Before purchasing class B shares in a mutual fund your broker or financial advisor should have carefully explained the difference in commissions between class A and class B shares. If you answered yes to any of the above questions or were sold class B shares without full disclosure of the risks and commissions you may have legal rights against your broker and brokerage firm.

Unregistered Broker or Securities

Anyone who sells securities must also be registered under the Financial Industry Regulatory and the Securities Exchange Commission broker/dealer registration rules or find an exemption from registration. This is true for anyone who gives financial advice as to the purchase and sale of securities. Investment advisers must also be registered or find an exemption. When an investor purchases a security and the registration provisions have not complied with the investor may have a right to rescind the transaction and/or hold the unregistered party liable for damages. Federal securities laws and state “blue sky” laws require brokers, brokerage firms, and the securities sold to be either registered or exempt from registration. If your broker or financial advisor is not registered or sold you unregistered securities you may have legal rights against the broker and brokerage firm. Contact us for help with broker investigation. Smart Check is an easy-access free tool to check the background of a financial professional and do your own quick broker investigations. shows pending actions and more.

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