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Broker Jeffrey M. Isaacs (Issacs) of Investors Capital Corporation (ICC) was recently suspended and sanctioned by The Financial Industry Regulatory Authority (FINRA) over allegations that Isaacs made negligent material misrepresentations of fact in connection with the unsuitable sale of two private placements to ICC customers. In addition, after the customers complained to Isaacs, he settled their claims without notifying ICC.

From January 12, 2005, through December 12, 2011, Issacs was associated with Investors Capital Corporation. On December 12, 2011, ICC filed a Form U5 stating that Isaacs “submitted a voluntary request to terminate association with the firm while under investigation for failing to follow firm policies.” Thereafter, Isaacs was registered with TFS Securities, Inc. (TFS) from November 21, 2011 through December 15, 2011. On December 15, 2011, TFS filed a Form U5 stating that Isaacs’ termination was voluntary. Issacs’ BrokerCheck discloses that he is also employed by JB Financial Resources.

FINRA alleged that Isaacs negligently misrepresented two customers that an investment in the Insight Real Estate LLC 2007 Secured Debenture Offering (Insight) was a safe, low-risk investment, misstated its payment terms, and omitted material facts relating to the speculative nature of the investment. The customers invested $100,000 in Insight in reliance on Issacs’ representations. Thereafter, FINRA alleged that Isaacs negligently misrepresented to the customers that an investment in CIP Leverage Fund Advisors, LLC (CIP) was for moderately conservative investors and would pay interest to the investors on a monthly basis. In fact, the CIP was a speculative investment that paid interest only on an accrued basis with the final payment of principal. The customers also invested $100,000 in CIP in reliance on Issacs representations.

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.

Articles Tagged with REIT

Jeffrey Isaacs of Investors Capital Corporation Suspended Over Unsuitable Sale of Securities

Behringer Harvard REIT Fund Investor Losses Continue to Mount