In April 2017 FINRA alleged that Davis consented to the sanctions and to the entry of findings that he recommended and effected unsuitable transactions in the accounts of customers by over-concentrating their assets in illiquid non-traded REITs. FINRA stated that the investments totaled $566,000, and represented between approximately 30% and 52% of the customers’ liquid net worth. FINRA found that this concentration in illiquid investments were excessive and unsuitable in light of the customers’ financial situations, risk tolerances, and investment objectives.
In June 2019 a customer complained that Davis violated the securities laws by alleging that Davis recommended an unsuitability of a fixed index annuity and mutual funds and the overconcentration of REITs in her account. The claim alleges $5,380 in damages.
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.
According to studies, non-traded REITs have historically have underperformed even 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. In addition, these products often continue to deceive investors for years through their control over their own prices, returning investor capital as a false distribution from operations, high fees on their redemption programs, and control of pertinent investor information. Investors often fail to understand that they have lost money until many years after agreeing to the investment in these products.
These types of alternative investment products have become so popular among brokers without providing any benefit to investors that 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.
Davis entered the securities industry in 1994. From July 2001 until November 2013 Davis was registered with Harvest Capital LLC. Since November 2013 Davis has been registered with Kovack Securities out of the firm’s Bristol, Connecticut 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.