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Apr 9, 2025

Brokers Nationwide Restart Push for Investors to Buy Reverse Convertibles

Investors are once again being pushed into structured products such as reverse convertibles by brokers who tout sturdy profits and very little downside risk. However, representatives are unable to account for why products like reverse convertibles have been unable to deliver stellar returns without posing a significant risk to investors’ capital. Reason being is that more than most brokers do not understand how reverse convertibles work and are only selling them because of the hefty commission.

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Apr 9, 2025

Variable Annuities Listed Among FINRA’s Nationwide Disciplinary Actions

The Financial Industry Regulatory Authority (FINRA) recently reported that it will focus its attention on examining products that are held out to outperform the market. According to FINRA, the economic environment that many investors have faced since 2008 has fostered an increase in appetite for high yield investments given the low yield in Treasuries. It has also fostered fraud, misappropriation, illegal sales practices, and unsuitable recommendations by brokers. Some of the products FINRA will be focusing on are: variable annuities, non-traded real estate investment trusts, municipal offerings, leveraged exchange traded funds, mortgage-backed securities, private placements, structured products, and life settlements. FINRA will also look into fee schemes since it is concerned that broker-dealers are charging their clients hidden, mislabeled, or excessive fees. Several cases have already been filed by FINRA against firms who have been taking advantage of their clients through fees.

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Apr 9, 2025

Massachusetts Hits Securities America, Inc. With $7.6 Million Restitution Order for Non-traded REIT Sales

Massachusetts securities regulators have hit Securities America, Inc. with $7.6 million in restitution to clients as well as fines over sales of non-traded real estate investment trusts (REITs). The restitution and fines stem from non-traded REITs sales from 2005 to present. Massachusetts’ investigation showed problems related to the firm’s own policies as well as the state rule that an investor’s purchase of REITs cannot be more than 10% of an investor’s liquid net worth. This particular matter involved 126 transactions over an eight-year period. An excessive concentration of REITs can be a violation of FINRA’s suitability rule. After the investigation of broker-dealer sales practices involving REITs, the Massachusetts Securities Division launched a broader inquiry into the sales of alternative investments to seniors.

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Apr 9, 2025

Massachusetts Hits Commonwealth Financial Network with $534,000 Restitution Order for Non-traded REIT Sales

Massachusetts securities regulators have hit Commonwealth Financial Network with $534,000 in restitution to clients as well as fines over sales of non-traded real estate investment trusts (REITs). The restitution and fines stem from non-traded REITs sales from 2005 to present. Massachusetts’ investigation showed problems related to the firm’s own policies as well as the state rule that an investor’s purchase of REITs cannot be more than 10% of an investor’s liquid net worth. After the investigation of broker-dealer sales practices involving REITs, the Massachusetts Securities Division launched a broader inquiry into the sales of alternative investments to seniors.

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Apr 9, 2025

Massachusetts Hits Lincoln Financial Advisors Corp. With $841,000 Restitution Order for Non-traded REIT Sales

Massachusetts securities regulators have hit Lincoln Financial Advisors Corp. with $841,000 in restitution to clients as well as fines over sales of non-traded real estate investment trusts (REITs). The restitution and fines stem from non-traded REITs sales from 2005 to present. Massachusetts’ investigation showed problems related to the firm’s own policies as well as the state rule that an investor’s purchase of REITs cannot be more than 10% of an investor’s liquid net worth. Lincoln Financial Advisors Corp. spokesman Michael Arcaro said: “We cooperated fully with the examination conducted by the Massachusetts Securities Division, and we are pleased to put this matter behind us.” An excessive concentration of REITs can be a violation of FINRA’s suitability rule. After the investigation of broker-dealer sales practices involving REITs, the Massachusetts Securities Division launched a broader inquiry into the sales of alternative investments to seniors.

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Apr 9, 2025

Massachusetts Hits Ameriprise Financial Services, Inc. With $1.6 Million Restitution Order for Non-traded REIT Sales

Massachusetts securities regulators have hit Ameriprise Financial Services, Inc. with $1.6 million in restitution to clients as well as fines over sales of non-traded real estate investment trusts (REITs). The restitution and fines stem from non-traded REITs sales from 2005 to present. Massachusetts’ investigation showed problems related to the firm’s own policies as well as the state rule that an investor’s purchase of REITs cannot be more than 10% of an investor’s liquid net worth. Chris Reese, a spokesman for Ameriprise Financial Services, Inc., declined to comment. An excessive concentration of REITs can be a violation of FINRA’s suitability rule. After the investigation of broker-dealer sales practices involving REITs, the Massachusetts Securities Division launched a broader inquiry into the sales of alternative investments to seniors.

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Apr 9, 2025

Massachusetts Hits Royal Alliance Associates Inc. with $125,000 Restitution Order for Non-traded REIT Sales

Massachusetts securities regulators have hit Royal Alliance Associates Inc. with $125,000 in restitution to clients as well as fines over sales of non-traded real estate investment trusts (REITs). The restitution and fines stem from non-traded REITs sales from 2005 to present. Massachusetts’ investigation showed problems related to the firm’s own policies as well as the state rule that an investor’s purchase of REITs cannot be more than 10% of an investor’s liquid net worth. An excessive concentration of REITs can be a violation of FINRA’s suitability rule. After the investigation of broker-dealer sales practices involving REITs, the Massachusetts Securities Division launched a broader inquiry into the sales of alternative investments to seniors.

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Apr 9, 2025

Apple REIT 8 Investor Alert – Do you think Apple REIT 8 Is Out of Cash?

Apple REIT 8 Investors who recently tried to cash out of the REIT are calling and telling us they think the REIT might be out of cash after they received a response to their recent redemption requests. In a January 24th letter, Glade Knight, the Apple REIT founder and chairman, told Apple REIT 8 investors that the REIT no longer had sufficient funds to meet their redemption requests in full. This leaves investors with a security that is practically illiquid. Seeing as redemption requests are now exceeding the funds available to meet them, Apple REIT 8 will have no choice but to suspend their redemption programs indefinitely. In that event, the REIT will become completely illiquid, and investors will have no access to their funds in the foreseeable future.

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Apr 9, 2025

Securities and Exchange Commission Warns Reverse Convertible Investors Nationwide

The Securities and Exchange Commission (SEC) has recently reported that broker-dealers are conducting sales of risky structured products, which ultimately hurt their clients. A sweep of more than 10 broker-dealers revealed that firms are steering clients into complex investments such as reverse convertibles that are not suitable for their portfolios. In many cases, the brokers did not disclose the risks associated with investing in reverse convertibles, misrepresented their values on client statements, and charged excessively high transaction fees. The SEC is recommending that brokers disclose the true nature of reverse convertibles to their clients, establish a supervisory system to avoid potential abuses, and perform adequate training of their sales representatives. Although this report touches upon faulty sales practices of risky products, it does not address what investors should really be concerned about.

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