Securities Lawyers Blog
Advisor Chad Barancyk (Barancyk), formerly employed by brokerage firms First Allied Securities, Inc. (First Allied) and Great Point Capital, LLC (Great Point) has been subject to at least 14 disclosures including 11 customer complaints, two regulatory actions, and an employment termination for cause. According to a BrokerCheck report the customer complaints concern 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 and have recovered in excess of $50 million in investor losses. Our firm also represented investors of Barancyk to try to recover their losses.
In their complaint, the clients allege that they trusted Barancyk, doing business as Naples Private Wealth (NPW) to invest funds for their retirement in a prudent and suitable manner. Instead, it was alleged that Barancyk misled Claimants and other investors by recommending unsuitable investment strategies in various illiquid alternative investments from approximately 2009 onward. In total, the clients allege they invested approximately $2 million with Barancyk in alternative investments resulting in over $500,000 in losses not including well-managed damages.
It was also alleged that Barancyk failed, as well as First Allied, to disclose multiple criminal related incidents on Mr. Barancyk’s Form U4. It was alleged that on October 2018 Barancyk was arrested and charged with battery. This arrest does not appear on Barancyk’s Form U4. On January 14, 2021 it was alleged that Barancyk was charged with a DUI where his blood alcohol level was .15 or higher or with a person under the age of 18 in the vehicle as well as knowingly driving while his license was suspended. It was alleged that First Allied terminated Barancyk one day later on January 15, 2021 but did not file a Form U5 noting the DUI.
DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments. These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure. Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.
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. Because investors are not compensated with additional return in exchange for higher risk and illiquidity, these kinds of alternative investment products are rarely, if ever, appropriate 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.
Barancyk entered the securities industry in 2005. From 2005 through November 2014, Barancyk was registered with SII Investments, Inc. From November 2014 through January 2021 Barancyk was registered with First Allied. From February 2021 through June 2022 Barancyk was associated with Great Point out of the firm’s Chicago, Illinois office location.
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.