Articles Tagged with Royal Alliance

shutterstock_168326705-199x300The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Linda Dowd. According to BrokerCheck records, Dowd has been subject to employment separation from WFG Investments Inc. (WFG Investments) and one regulatory action. Linda Dowd has spent 27 years in the securities industry and was most recently registered with Sunbelt Securities, Inc. (Sunbelt Securities) out of the firm’s Carlsbad, California office location. Brokers and investment advisers that forge customer signatures constitute a form of securities fraud.

In July 2016, Linda Dowd was terminated from her position at WFG Investments and has been sanctioned by FINRA. According to FINRA, Dowd had a customer pre-sign distribution requests forms on at least 26 occasions to effectuate a verbal distribution request as an accommodation to the customer. The findings state Dowd additionally utilized a personal email address to create a perception of legitimate customer communications. Dowd was also alleged to have falsely advised the firm’s compliance personnel that she had received the customer’s completed and signed distribution requests via email. For this, Dowd was fined $5,000 and was issued a one-year suspension.

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shutterstock_178801082The investment fraud lawyers of Gana LLP are investigating the employment termination filed with The Financial Industry Regulatory Authority (FINRA) by Royal Alliance Associates, Inc. (Royal Alliance) and the regulatory action filed by FINRA involving broker Darrin Farrow (Farrow). According to BrokerCheck records Farrow has been subject to one customer complaint, one employment separation for cause, and two regulatory actions.

According to Royal Alliance, the firm terminated Farrow after alleging Farrow received information that he was involved in an outside business activity not approved by the firm.  Thereafter, in June 2016, FINRA suspended Farrow after alleging he participated in two undisclosed outside business activities (OBAs) without disclosing his involvement to his firm. (FINRA No. 2015045751101).  FINRA found that Farrow founded an unincorporated entity that provides consulting services to the cannabis industry and also cultivates, produces, and manufactures cannabis and he also formed a Delaware limited-liability company that grows cannabis and supplies it to dispensaries throughout Oregon.  According to FINRA Farrow participated in undisclosed private securities transactions with firm customers involving the sale of $1 million of membership interests.

The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  According to brokercheck records Farrow has disclosed OBAs listed as including MonsterShares LLC – an investment related business, Mad Farmaceuticals, DBF Properties, LLC, Adviceware, and MM Herndon LLC.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.

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shutterstock_170709014The securities fraud attorneys of Gana LLP are investigating potential recovery options for investors with broker Glenn King (King). Recently The Financial Industry Regulatory Authority (FINRA) brought an enforcement action (FINRA No. 2015044444801). In addition, to the FINRA complaint, King’s BrokerCheck disclosures reveal an astonishing number of reported incidents including 1 investigation, 19 customer complaints, 1 firm termination, 2 financial disclosures – which includes a bankruptcy filing, and 1 judgement or lien.

The FINRA complaint alleges that from April 2008 through March 2011, while King was associated with brokerage firm Royal Alliance Associates, Inc. (Royal Alliance), King made fraudulent misrepresentations and omissions to seven Royal Alliance customers in connection with the sale of Unit Investment Trusts (UITs). FINRA found that King misrepresented to the customers that he would use their investment funds to purchase safe, no-risk bonds, and that King would not charge fees or commissions for the transactions. ln reality, King was alleged to have purchased 44 UITs that resulted in approximately $17,000 in realized losses to the customers, approximately $43,000 in unrealized losses, and approximately $38,000 in commissions to King.

FINRA also alleged that from January 2013 through December 2014, while King was associated with Buckman, Buckman & Reid (BBR), King engaged in a pattern of short-term trading in long-term investment products in the accounts of four customers. FINRA alleged that the pattern of trading was excessive and unsuitable, and resulted in approximately $163,000 in losses to the customers while profiting King by generating commissions of approximately $210,000.

Finally, FINRA alleged that from January 2013 through December 2014, King exercised discretion in the accounts of four BBR customers without their written authority or the approval of his brokerage firm to conduct the trading.

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shutterstock_143685652According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Dawn Bennett (Bennett) has been the subject of at least six customer complaints over the course of her career. Customers have filed complaints against Bennett alleging securities law violations including that the broker made unsuitable investments, breach of fiduciary duty, negligence, misrepresentations, and excessive trading among other claims. In addition to customer complaints, The Securities and Exchange Commission (SEC) filed a press release announcing fraud charges against Bennett, a Maryland-based financial services firm and founder/CEO, accusing her of grossly inflating the amount of managed assets and exaggerating the investment returns actually obtained for customers.

Bennett entered the securities industry in 1987. From 2006, until October 2009, Bennett was associated with Royal Alliance Associates, Inc. Thereafter, from October 2009, till present Bennett is associated with Western International Securities, Inc.

The SEC’s allegations relate to Bennett’s attempts to inflate the firm’s profile and prestige by overhyping assets under management and customer returns. The SEC alleged that Bennett frequently touted to customers and on her paid radio program that highly profitable investment returns generated by Bennett Group Financial Services placed the firm in the top 1 percent of firms worldwide. However, the SEC charged that Bennett failed to disclose that the returns were calculated for a model portfolio and not based on actual investor performance. The SEC further alleged that Bennett and her firm claimed to be managing more than $2 billion in assets when in reality Bennett managed no more than one-fifth of that amount.

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shutterstock_156562427Since the financial crisis the non-traded real estate investment trust (REIT) market has been a financial boon for the brokerage industry. A REIT is a security that invests typically in real estate related assets. Generally, REITs can be publicly or privately held. While publicly held REITs can be sold on an exchange, are liquid, and have lower commissions and fees, non-traded REITs are sold are private, are speculative, illiquid, and often charge fees of over 10%. Nonetheless, non-traded REITs have become a darling product of the financial industry, mostly because of the fat fees brokers earn for recommending these speculative products.

Brokers selling these products sometimes claim that non-traded REITs offer stable returns compared to the volatile stock market. As the Financial Industry Regulatory Authority (FINRA) and the Securities Exchange Commission (SEC) have recently noted, these products may not be as safe and stabile as advertised.

InvestmentNews recently ranked non listed REITs by second quarter 2014 invested assets. As shown below, investment in these funds are substantial and continues to grow each quarter

Company 2Q invested assets ($M) Original share price Current share value Original distribution rate Current distribution rate 2Q14 FFO 2 payout ratio
Inland American Real Estate Trust $10,128.5 $10 $6.94 6.20% 5.00% 75%
Corporate Property Associates 17 Global $4,564.7 $10 $9.50 6.50% 6.50% 81%
Apple Hospitality $3,960.0 $11 $10.10 8.00% 7.25% 83%
Industrial Income Trust $3,747.6 $10 $10.40 6.00% 6.00% 100%
Tier REIT $3,455.8 $10 $4.20 7.00% 0.00% N/A
CNL Lifestyle Properties $3,343.4 $10 $6.85 6.25% 4.25% 108%
Griffin-American Healthcare REIT II $3,056.2 $10 $10.22 6.50% 6.65% 143%
Monogram Residential Trust $2,879.1 $10 $10.03 7.00% 3.50% 189%
Cole Credit Property Trust IV $2,833.0 $10 $10.00 6.25% 6.25% 145%
KBS Real Estate Investment Trust II $2,714.1 $10 $10.29 6.50% 6.50% 98%
Cole Corporate Income Trust $2,606.3 $10 $10.00 6.50% 6.50% 94%
Hines Real Estate Investment Trust $2,422.1 $10 $6.40 6.00% 2.90% 88%
American Realty Capital Trust V $2,233.5 $25 $25.00 6.60% 6.60% 86%
KBS Real Estate Investment Trust $2,058.0 $10 $4.45 7.00% 0.00% N/A
Landmark Apartment Trust $1,889.4 $10 $8.15 6.00% 3.00% 38%
Phillips Edison – ARC Shopping Center $1,846.9 $10 $10.00 6.50% 6.70% 129%
Steadfast Income REIT $1,592.7 $10 $10.24 7.00% 7.00% 165%
Strategic Storage Trust $731.5 $10 $10.79 7.00% 6.50% 120%
Signature Office $676.4 $25 $25.00 6.00% 6.00% 83%
Lightstone Value Plus REIT $643.2 $10 $11.80 7.00% 7.00% 69%

Many brokerage firms have come under fire for their non-traded REIT sales practices. For instance LPL Financial in particular has been accused by several regulators of failing to reign in their broker’s sales practices concerning alternative investments. On March 24, 2014, LPL Financial was fined $950,000 by the Financial Industry Regulatory Authority (FINRA) for failing to supervise its brokers’ marketing of nontraditional investments.  LPL Financial was alleged to have deficient supervision in the sale of certain alternative investment products, including REITs, oil and gas partnerships, business development companies (BDC’s), hedge funds, and managed futures.

LPL Financial also paid a $500,000 fine to the Massachusetts Securities Division and was ordered to pay $4.8 million in restitution for supervisory and suitability related violations concerning non-traded REITs.  In total six firms paid $11 million in restitution and fines related to REIT sales. The other firms including Ameriprise Financial Inc., Lincoln National, Commonwealth Financial Network, Royal Alliance Associates, and Securities America.

The attorneys at Gana LLP are experienced in representing investors to recover their financial losses through the misrepresentation of non-traded REITs. Our consultations are free of charge and the firm is only compensated if you recover.

shutterstock_130706948The law offices of Gana LLP are investigating claims that broker Angelo Talebi (Talebi) made misrepresentations regarding investments in alternative investments such as Real Estate Investment Trusts (REITs) and oil and gas limited partnerships. Upon information and belief, Talebi is targeting Iranian investors in California. According to Talebi’s BrokerCheck, at least 13 customer complaints have been filed regarding Talebi’s sales practices in FINRA arbitration. Some of the complaints also allege that Talebi unsuitably invested clients in various investments including variable annuities and private placements including KBS 1 REIT, Leaf Equipment finance, Inland American Real Estate Trust, Atlas Resources. Another complaint alleges unsuitable equity investments and excessive use of margin.

From 1999 through December 2012, Talebi was associated with LPL Financial LLC (LPL Financial). Thereafter, until April 2014, Talebi was a registered representative of Royal Alliance Associates, Inc.  Currently, Talebi is associated with Independent Financial Group, LLC.

The investment products that Talebi is alleged to have inappropriately recommended to clients are part of a growing industry trend of placing investors heavily in alternative investments and illiquid products. Many times brokers tell investors that these products are more stable and predictable than the stock market. After the financial crisis many investors were receptive to these sales pitches. However, brokers sometimes fail to disclose that the stability of these investments is artificially generated by the lack of disclosure and trading market for these products. In the cases of REITs and oil and gas private placements investors may only learn years after investing that the value of these assets has fallen substantially and some investors do not know of their losses until the investment goes completely bust.

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shutterstock_189006551This article picks up on our prior post concerning a recent report by Bloomberg concerning allegations that brokerage firms have used unscrupulous tactics in rolling over employee 401(k) plans into IRA accounts.

The article highlighted how Kathleen Tarr (Tarr) and Richard McCollam (McCollam) with Royal Alliance Associates gained access to AT&T Inc. employees. Tarr was also associated with SII Investment, Inc., from July 2010 until November 2012. McCollam began marketing to AT&T employees with 401(k) rollovers and lump-sum pension payments. The telecommunications company has 246,000 workers and ranks among the best 15 percent of U.S. plans in terms of fees, charging expenses as low as .01 percent. At AT&T employees can take a pension monthly payment or a lump sum payment.

According to the article the employees looked to Tarr as 401(k) expert and visited their homes and offices in order to advise them on their retirement plans. Bloomberg found that Tarr encouraged hundreds of departing AT&T employees to roll over their retirement savings into risky high-commission investments that the SEC and FINRA have warned customers against investing substantial unsuitable sums into.

According to Bloomberg McCollam handled the back office while Kathleen Tarr prospected for clients. Bloomberg reported that McCollam recommended that clients put 60 percent to 70 percent of their money in variable annuities with the rest in non-traded REITs, including Inland American Real Estate.

However, investing in a variable annuity within an IRA makes no sense for most investors. IRAs are already tax deferred vehicles. One of the main benefits of a variable annuity is its tax deferment. However, a variable annuity in an IRA provides no additional tax savings. Moreover, annuities increase costs and generate fees and commissions for the broker over the cost of simply investing in mutual funds outside of the annuity. According to Bloomberg, McCollam, Tarr, and Royal Alliance would generally receive commissions of as much as 6 percent or 7 percent of the money that clients invested in variable annuities. In addition, the mutual funds selected would charge customers 2 percent to 3 percent a year in fees. Compared to AT&Ts .01 percent fee it is difficult to imagine how customers are benefiting from these rollovers.

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