Securities Lawyers Blog
Previously financial advisor Mark Richardson (Richardson), previously employed by brokerage firm Lightpath Capital, Inc has been subject to at least 2 disclosable events. These events include 2 customer complaints. According to a BrokerCheck reports most of the recent customer complaints concern either corporate debt securities or 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.
FINRA BrokerCheck shows a pending customer complaint with a damage request of $696,494.19 on May 19, 2023.
Claimants collectively invested $697,474.19 in real estate private placement between November 2019 and February 2020 which failed due to the due to the unforeseen and unprecedented impact of the COVID pandemic on the student housing sector and the sponsor’s failure to repay the bridge equity it borrowed to acquire the property, which was discovered in December 2021, and ultimately resulted in a forced sale of the property. Claimants filed an arbitration alleging violation of federal securities laws, violation of California securities laws, California unfair, unlawful, and fraudulent business practices, breach of contract, common law fraud, breach of fiduciary duty, negligence and gross negligence. The firm denies all allegations. Additionally, the firm aggressively facilitated litigation for the benefit of investors to recover losses for investors which resulted in a favorable settlement with the sponsor and a jury award against the bridge equity lender and investors have already received a partial return of their initial investment.
FINRA BrokerCheck shows a pending customer complaint on December 22, 2022.
Claimants collectively invested $2,034,006 in a real estate private placement between October 2019 and March 2020 which failed due to the unforeseen and unprecedented impact of the COVID pandemic on the student housing sector and the sponsor’s failure to repay the bridge equity it borrowed to acquire the property, which was discovered in December 2021, and ultimately resulted in a forced sale of the property. Claimants filed an arbitration alleging violation of federal securities laws, violation of California securities laws, California unfair, unlawful, and fraudulent business practices, breach of contract, common law fraud, breach of fiduciary duty, negligence and gross negligence. The firm denies all allegations. Additionally, the firm aggressively facilitated litigation for the benefit of investors to recover losses for investors which resulted in a favorable settlement with the sponsor and a jury award against the bridge equity lender.
Alternative investments, including nontraded REITs, oil and gas offerings, and equipment leasing products, are examples of DDPs. Investors almost never benefit from these alternative investments, which are typically inappropriate because of their high fees and expense structure. To push these subpar investments, brokers are given additional commissions, leading to perverse incentives that manipulate the market.
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. It is the responsibility of brokers to inform investors that non-traded REITs deliver lower returns than treasuries and are both high risk and illiquid—but they frequently fail to do so. Since there is no additional return to justify the higher risk and illiquidity, these alternative investment products are typically unsuitable 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.
Richardson has been in the securities industry for more than 9 years. Richardson has been registered as a Broker with Lightpath Capital, Inc since 2014.
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.