Securities Lawyers Blog
Currently financial advisor Michael Risko (Risko), currently employed by brokerage firm Osaic Institutions, INC. has been subject to at least 2 disclosable events. These events include 2 customer complaints. According to a BrokerCheck reports most of the recent customer complaints concern either corporate debt securities or alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements. The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $45,420.00 on January 13, 2024.
A paperwork and processing error negated the redemption of a non-traded REIT due to death for Q4-2022. Share redemptions were suspended for Q1-2023 in advance of going public
FINRA BrokerCheck shows a settled customer complaint with a damage request of $330,000.00 on June 26, 2023.
Representative sold a REIT that was allegedly unsuitable for the client’s investment profile.
DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments. With high fees and costs, these alternative investments are usually inappropriate for investors and rarely provide meaningful returns. By offering brokers extra commissions, firms incentivize the sale of poor-quality investments, ultimately leading to a manipulated market driven by artificial demand.
Several studies have confirmed that Non-traded REITs underperform publicly traded REITs with some showing that Non-Traded REITs cannot even beat safe benchmarks, like U.S. treasury bonds. Brokers are supposed to warn investors that non-traded REITs offer lower returns than treasuries while being risky and illiquid—however, this disclosure is often neglected. Because additional returns do not compensate investors for increased risk and illiquidity, these alternative investment products are hardly ever suitable for investors.
Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client after conducting due diligence. Due diligence includes an investigation into the investment’s properties including its benefits, risks, tax consequences, issuer, history, and other relevant factors. Appropriate due diligence would identify that an alternative investment’s high costs, illiquidity, and conflicts of interests that would make the investment not suitable for investors. Investors often fail to understand that they have lost money until many years after agreeing to the investment. In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.
Unfortunately, these types of alternative investment products continue to popular among brokers due to their high commissions. In order to counter the perverse incentives to sell these flawed product many states now limit investors from investing more than 10% of their liquid assets in Non-Traded REITs and BDCs. Many states impose these limitations because these investments do not benefit investors.
Risko entered the securities industry in 1989. Risko has been registered as a Broker with Osaic Institutions, INC. since 2016.
Investors who have suffered losses are encouraged to contact us at (800) 810-4262 for consultation. At Gana Weinstein LLP, our attorneys are experienced representing investors who have suffered securities losses due to the mishandling of their accounts. Claims may be brought in securities arbitration before FINRA. Our consultations are free of charge and the firm is only compensated if you recover.