Securities Lawyers Blog
Advisor Kenneth Guerra (Guerra), currently employed by Independent Financial Group, LLC (Independent Financial) has been subject to at least two customer complaints, one financial disclosure, and one regulatory violation during the course of his career. According to a BrokerCheck report the customer complaints concern alternative investments such as direct participation products (DPPs) like non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs. The attorneys at Gana Weinstein LLP have represented dozens of investors who suffered losses caused by these types of high risk, low reward products.
In September 2019 a customer complained that Guerra violated the securities laws by alleging that Guerra engaged in sales practice violations related investments in high-risk alternative investments, resulting in a loss of some of their retirement assets. The claim alleges $100,000 in damages and settled for $25,000.
In March 2013 a customer complained that Guerra violated the securities laws by alleging that Guerra engaged in sales practice violations related to non-traded REITs purchased in 2007 through 2008 that were misrepresented and unsuitable. The claim alleges $80,000 in damages and settled for $60,000.
DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments. These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure. Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.
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. Because investors are not compensated with additional return in exchange for higher risk and illiquidity, these kinds of alternative investment products are rarely, if ever, appropriate 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 no rational person can come up with an argument to support the continued sale of these products. Unfortunately for investors there is no regulatory authority in the United States with the ability to analyze investments in order to ban flawed investment products.
Guerra entered the securities industry in 1985. Since March 2010 Guerra has been registered with Independent Financial out of the firm’s Grants Pass, Oregan office location.
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.