Articles Tagged with VFG Securities

shutterstock_52426963The securities lawyers of Gana Weinstein LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Mark Trewitt (Trewitt).  According to BrokerCheck records Trewitt has been subject to at least four customer complaints.  The customer complaints against Trewitt allege securities law violations that including unsuitable investments and misrepresentations among other claims.   Many of the complaints involve direct participation products (DPPs) and private placements including non-traded real estate investment trusts (REITs), and other alternative investments.

Our firm has represented many clients in these types of products.  All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds.  For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed.  However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them.  Further, investor 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.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client.  In order to make a suitable recommendation the broker must meet certain requirements.  First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors.  Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

shutterstock_189496604The securities lawyers of Gana Weinstein LLP are investigating a complaint filed by The Financial Industry Regulatory Authority (FINRA) against brokerage firm VFG Securities, Inc. (VFG) and its CEO Jason Vanclef (Vanclef) (FINRA No. 2013038283001).  The complaint alleges that approximately 95 percent of VFG’s revenue was obtained from the sale of non-traded direct participation products (DPPs) and non-traded REITs and other alternative investments such as equipment leasing programs and oil & gas private placements between approximately November 2010 and June 2012.  Even though alternative investments are highly speculative and illiquid investments that have little to no place in the average investor’s portfolio, FINRA alleged that VFG failed to reasonably supervise the sale of illiquid alternative investments, including non-traded DPPs and non-traded REITs, to ensure that customers did not become overly concentrated in these products.

According to FINRA, VFG’s alternative investment strategy comes from a book distributed by the firm to customers and authored by Vanclef entitled Wealth Code: How the Rich Stay Rich in Good Times and Bad (The Wealth Code).  FINRA found that Vanclef used The Wealth Code as sales literature to promote investments in non-traded DPPs and non-traded REITs, and to lure potential investors to VFG.  FINRA claims that Vanclef repeatedly claimed in The Wealth Code that non-traded DPPs and non-traded REITs offer both high return and capital preservation among other claims.  However, FINRA has found that the these claims are false, inaccurate, misleading, and contradicted information provided in the prospectuses of the products that Vanclef and VFG sold.

FINRA stated that non-traded DPPs and non-traded REITs are speculative investments that contain a high degree of risk, including the risk that an investor may lose a substantial portion or all of his or her initial investment.  Yet, Vanclef claimed in The Wealth Code that by investing in “real” or “tangible” assets and other instruments that he recommended, investors could “reasonably achieve 8-12% results,” on their investments and “get consistent returns” that provided “piece [sic] of mind.”