Broker Patrick Mendenhall in Usca Securities LLC Firm Has Customer Complaint

Currently financial advisor Patrick Mendenhall (Mendenhall), currently employed by brokerage firm Usca Securities LLC 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 pending customer complaint with a damage request of $5,000,000.00 on January 12, 2024.

 

FINRA BrokerCheck shows a pending customer complaint with a damage request of $3,000,000.00 on October 05, 2023.

Client is an experienced investor with an estimated net worth of over $6.5 million who actively monitored and participated in investment decisions in his accounts. Client complains of losses and missed opportunity related to specific investments that go back five years, but overall his accounts were profitable while at USCA. One security the client complains about was initially recommended by USCA, but the client continued to make unsolicited purchases when the security’s price had already started to decline. The client also makes claims related to missed opportunity in another stock that was sold as part of an agreed upon covered call strategy but later increased in price.

DDPs feature investment options like non-traded REITs, oil and gas projects, equipment leasing products, and other alternative assets. Investors almost never benefit from these alternative investments, which are typically inappropriate because of their high fees and expense structure. Brokers who sell these products receive extra commissions, encouraging them to promote low-quality investments and creating distorted incentives that artificially inflate the market.

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 selling these products must disclose to the investor that non-traded REITs provide lower investment returns than treasuries while being high risk and illiquid – but almost never do. Given that investors are not rewarded with higher returns for assuming greater risk and illiquidity, such alternative investment products are rarely appropriate for them.

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.

Mendenhall entered the securities industry in 1982. Mendenhall has been registered as a Broker with Usca Securities LLC since 2010.

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.

 

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