Articles Tagged with Investment Planners

shutterstock_24531604-200x300According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker William Brunner (Brunner) has been subject to five customer complaints, one bankruptcy, two regulatory actions, and one termination for cause.  Brunner was formerly registered with Investment Planners, Inc. (Investment Planners) until May 2017.  Many of the customer complaints against Brunner concern allegations of high frequency trading activity also referred to as churning, unauthorized trading, and unsuitable investments.

In April 2018 FINRA barred Brunner from the industry stating that Brunner consented to the sanction and declined to appear for on-the-record testimony requested by FINRA in connection with an investigation into excessive trading and use of discretion without written authorization in customers’ accounts.  In May 2017 Investment Planners terminated Brunner claiming that allegations were made by a client concerning unauthorized trading.

In June 2017 a customer filed a complaint claiming that Brunner engaged in negligence, breach of fiduciary duty, churning, unauthorized trading, and unsuitable investments claiming $1,000,000 in damages.  The claim was settled.

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shutterstock_146470052This article follows up on a recent article reported in Reuters concerning Atlas Energy LP’s private placement partnerships in oil and gas. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal allows investors to participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of oil into viable prospects. In addition, Atlas promises to invest up to $145 million of its own capital alongside investors.

In the last article we explored how the house seems more likely to win on these deals over investors. But beyond the inherent risks with speculating on oil and gas and unknown oil deposits most investors don’t realize the deals are often unfair to investors. In a normal speculative investment as the investment risk goes up the investor demands greater rewards to compensate for the additional risk. However, with oil and gas private placements the risks are sky high and the rewards simply don’t match up.

In order to counter this criticism, issuers say that the tax benefits of their deals where the investor can write off more than 90 percent of their initial outlay the year they make it helps defray the risk and increase the value proposition. First, the same tax advantage claims are often nominal compared to the principal risk of loss of the investment as seen by Puerto Rican investors in the UBS Bond Funds who have now seen their investments decline by 50% or more in some cases. Second, often times brokers sell oil and gas investments indiscriminately to the young and old who have lower incomes and cannot take advantage of the tax benefits.

shutterstock_103610648As recently reported in Reuters, Atlas Energy LP has marketed itself to investors as a way to get into the U.S. energy boom. By contributing at least $25,000 in a private placement partnership that will drill for oil and gas in states such as Texas, Ohio, Oklahoma and Pennsylvania and share in revenues generated from the wells. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal sounds good when pitched: participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of fossil fuels into potentially viable prospects and to boot Atlas will invest up to $145 million of its own capital alongside investors. Through this method and similar deals, oil and gas projects have issued nearly 4,000 private placements since 2008 seeking to raise as much as $122 billion.

But before you take the plunge a review of the Atlas’s offering memorandum reveals some red flags and given Atlas’ past failure rate investors should think twice. First, up to $45 million of the money raised will be paid to Atlas affiliate Anthem Securities that will then be turned over to as commissions to broker-dealers who pitch the deal to investors. Up to $39 million more will be used to buy drilling leases from another affiliate. Think investors will get a fair price on the leases when Atlas controls both sides of the deal? More conflicts ahead as Atlas affiliated suppliers may also get up to $53 million for buying drilling and transport equipment. Next, an additional $8 million of Atlas’s investment is a 15 percent markup on estimated equipment costs. Finally, Atlas will pay itself nearly $52 million in various other fees and markups.

In sum, at least 40% of Atlas’s $145 million investment alongside mom and pop goes right back to the company. In addition, Atlas’ profits don’t stop there, when the venture starts generating revenue Atlas is entitled to 33% before accounting for those payments and markups. In the end, not much of a risk at all for Atlas.

Investors continue to suffer substantial losses from recommended investments in the Behringer Harvard REIT Funds.  The Behringer Harvard REIT Funds including the Behringer Harvard Mid-Term Value Enhancement I, Behringer Harvard Short-Term Opportunity Fund I, and the Behringer Harvard REIT I  and II (Behringer REITs) have sometimes been sold to investors as safe, stable, income producing real estate investment trusts.  While the Behringer REITs were initially sold to investors for $10 per share, currently some of these REITs trade as low as approximately $2.00 on the secondary market.  Worse still, some of the funds no longer pay a dividend or investors receive only a fraction of what their advisor initially told their clients they could expect the investment to yield.

The Behringer REITs are speculative securities, non-traded, and offered only through a Regulation D private placement.  Unlike traditional registered mutual funds or publicly traded REITs that have a published daily Net Asset Value (NAV) and trade on a national stock exchange, the Behringer REITs raised money through private placement offerings and are illiquid securities.  In recent years, increased volatility in stocks has led to an increasing number of advisor recommendations to invest in non-traded REITs as a way to invest in a stable income producing investment.  Some non-traded REITs have even claimed to offer stable returns while the real estate market has undergone extreme volatility.  Brokers are often motivated to sell non-traded REITs to clients due to the large commissions that can be earned in the selling the Behringer REITs.

Investors are now bringing claims against the brokerage firms that sold them the Behringer REITs alleging that their advisor failed to disclose important risks of the REITs.  Some common risks that customers have alleged were not disclosed include failing to explain that Behringer REITs may not be liquidated for up to 8 to 12 years or more, that the redemption policy can be eliminated at any time, and that investor returns may not come from funds generated through operations but can include a return of investor capital.