Securities Lawyers Blog
Previously financial advisor Elizabeth Engle (Engle), previously employed by brokerage firm Purshe Kaplan Sterling Investments has been subject to at least one disclosable event. These events include one customer complaint. 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 $45,000.00 on November 03, 2023.
Client alleges unsuitable recommendations by the rep as well as breach of fiduciary duty and negligence in the sale of Cole Office and Industrial REITs.
Alternative investments like nontraded REITs, oil and gas offerings, and equipment leasing products are part of DDPs. Due to their steep costs and fee structures, these alternative investments are nearly always unsuitable and seldom yield profits for investors. Brokers earn additional commissions for promoting these low-quality investments, fostering a system of skewed incentives that result in an artificially sustained 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 offering these products are required to inform investors that non-traded REITs come with lower returns than treasuries, along with high risk and illiquidity—but they rarely 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.
Engle has been in the securities industry for more than 3 years. Engle has been registered as a Broker with Purshe Kaplan Sterling Investments 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.
