Securities Lawyers Blog
Currently financial advisor Robert Li (Li), currently employed by brokerage firm LPL Financial LLC 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 settled customer complaint with a damage request of $200,000.00 on January 06, 2023.
Customer alleges that representative recommended an investment strategy involving REITs, and buying certain equities on margin which were not suitable for the customer’s investment objectives and risk tolerance. Time period: December 2008 to January 2023.
FINRA BrokerCheck shows a settled customer complaint with a damage request of $75,000.00 on January 05, 2023.
Customer alleges that representative recommended an investment strategy involving buying certain equities on margin which was not suitable for the customer’s investment objectives and risk tolerance. Time period: November 2020 to January 2023.
Alternative investments, including nontraded REITs, oil and gas offerings, and equipment leasing products, are examples of DDPs. Due to their steep costs and fee structures, these alternative investments are nearly always unsuitable and seldom yield profits for investors. 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. 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. 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.
Li entered the securities industry in 1999. Li has been registered as a Broker with LPL Financial LLC since 2003.
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.