Soreide Law Group Investigating IMS Securities For Unsuitability

Soreide Law Group is investigating claims on behalf of investors who purchased investments from IMS Securities, Inc. (CRD#: 35567, Houston, Texas) – a brokerage firm that has been expelled by the Financial Industry Regulatory Authority (“FINRA”) for failing to pay a fine. FINRA fined the firm pursuant to a Letter of Acceptance, Waiver and Consent (the “AWC”) #2014039417401 executed on Sept. 30, 2016. The AWC’s findings stated that IMS Securities failed to supervise variable annuity exchange transactions and use of consolidated reports.

IMS Securities Fails To Supervise Annuity Exchanges, Consolidated Reports

The AWC stated that from July 15, 2013 to May 8, 2014, IMS Securities did not maintain adequate supervisory procedures for monitoring the representatives’ variable annuity transactions to determine if they were unjustified. IMS Securities designated the Chief Financial Officer as responsible for reviewing variable annuity transactions to ensure that they were compliant with the regulations. However, the firm never provided the CFO with tools or guidance. As a result, the CFO could not determine whether the exchanges were warranted. For example, the firm did not provide him with a trend analysis or exception reports for reviewing transactions for excessive exchange rates. Because of this, FINRA found that IMS Securities violated FINRA Rules 2330(d), 2110, and NASD Rules 3010.
FINRA also slammed IMS Securities for failing to supervise consolidated reports. IMS Securities apparently established written supervisory procedures for consolidated reports but failed to enforce them. IMS Securities was supposed to review and approve the reports due to some of the information referencing assets held by customers at other institutions that needed to be verified before the reports were provided to customers. Apparently, the firm did not attempt to verify the accuracy of the reports until the reports had already been sent to customers. Additionally, IMS Securities did not provide any evidence that the information was verified other than the principals’ initials having been inserted on the reports. As a result, FINRA stated that IMS Securities violated FINRA Rules 2010 and NASD Rule 3010.

Customers Complain About IMS Securities’ Alternative Investments Sales

IMS Securities has also been on the receiving end of multiple customer-initiated investment-related complaints. For example, on July 7, 2017, IMS Securities customers filed FINRA Arbitration #18-02199. Customers claimed that the firm, among other things: aided and abetted fraud; aided and abetted a breach of fiduciary duty; and failed to supervise a party who caused the customers to invest their money in highly risky, illiquid and unsuitable investments. The customers alleged to have been defrauded in regards to their investments in United Mortgage Trust (“UMT”), United Development Funding (“UDF II”) and United Development Funding III (“UDF III”). IMS Securities was ordered to pay those customers $1,019,211.00 in damages.
Previously, IMS Securities Inc. was named in FINRA Arbitration #16-01800, filed by customers on June 16, 2016. The IMS Securities Inc. customers brought causes of action including: breach of contract, breach of fiduciary duty; omission of a material fact; negligence; misrepresentation; and failure to supervise. The customers contended that IMS Securities failed to diversify their investment portfolios. Customers’ accounts were over-concentrated in United Development Funding IV, NetReit and ARC New York City REIT. The Arbitrators stated that IMS Securities was liable for the customer’s losses on alternative investments, private placements and annuities. Accordingly, an Award was entered against IMS Securities – the firm was required to pay customers’ $1,322,216.06 in damages.

United Development Funding (UDF) Settles SEC Allegations By Paying $8,200,000.00

As an aside, the Securities and Exchange Commission (“SEC”) charged United Development Funding, III, LP and United Development Fund, IV – publicly-traded investment funds that deploy investor capital as loans to land developers and homebuilders – as well as four executives (Hollis M. Greenlaw, Theodore F. Etter, Benjamin L. Wissink and Cara D. Obert) with misleading investors regarding the use of UDF funds, in violation of Section 17 of the Securities Act. Apparently, investors were induced to invest in UDF based on UDF advertising that it could pay up to 9.75% in annualized returns and make regulator distributions.
UDF reportedly failed to inform investors that it did not possess the cashflow to support distributions from UDF III. Apparently, funds raised for UDF IV that were meant for development projects were inappropriately allocated to UDF III so that the distributions could be made.  Evidently, Greenlaw, Etter, Wissink and Obert acquiesced to paying $8,200,000.00 in civil penalties and disgorgement to settle the SEC’s allegations.

Have you incurred losses by investing with IMS Securities or by investing in United Development Funding? If so, connect with Soreide Law Group at (888) 760-6552 to discuss your case with our qualified counsel. Soreide Law Group represents clients nationwide and only charges a fee upon making a recovery of losses.