Securities Lawyers Blog
Advisor Lee Kramer (Kramer), currently employed by FSC Securities Corporation (FSC Securities), has been subject to at least two customer complaints, seven regulatory actions, and two employment terminations for cause during the course of his career. According to a BrokerCheck report one of 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. Kramer discloses that he operates a number of outside businesses, some of which are investment related, including Kramer Financial, LLC and Kramer Wealth Managers. The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.
In October 2019 a customer complained that Kramer violated the securities laws by alleging that Kramer engaged in sales practice violations related to recommending alternative investments such as BDCs and an annuity. The claim alleges $93,000 and is currently pending.
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. Continue Reading