Securities Lawyers Blog
Previously financial advisor Howard Kavinsky (Kavinsky), previously employed by brokerage firm Supreme Alliance LLC has been subject to at least 2 disclosable events. These events include one customer complaint, one tax lien. 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 final customer complaint on December 20, 2024.
Without admitting or denying the findings, Kavinsky consented to the sanction and to the entry of findings that he falsified at least 190 consolidated account statements for at least eight customers, some of whom were seniors, by overstating the customers’ account balances and reflecting fictitious investments in a hedge fund. The findings stated that Kavinsky also falsified the consolidated account statements for at least six of these customers to reflect that he had invested a portion of their funds in a hedge fund, even though he had not made any such investments. The findings also stated that Kavinsky provided false and misleading information and testified falsely to FINRA. In a request sent to Kavinsky, FINRA requested that he identify all customers for whom he had ever misrepresented account values on any document. Kavinsky responded falsely by naming only a married couple who had already complained about Kavinsky to the firm. At the time that Kavinsky made this response, he knew it was false and that he had actually overstated the account values for at least eight customers on their consolidated account statements. Moreover, during on-the-record testimony that FINRA conducted, Kavinsky repeatedly testified falsely that he never told any of his customers that they were invested in any hedge funds.
FINRA BrokerCheck shows a pending customer complaint with a damage request of $760,000.00 on June 22, 2024.
Clients claim RR refuses to provide them with copies of their statements and they believe their account balances are inaccurate. Attorney for clients further alleges over the course of the past two years, client funds have gone missing including qualified funds being removed from qualified accounts and representative provided false and misleading information pertaining to account balances.
Products under DDPs include non-traded REITs, oil and gas offerings, equipment leasing investments, and a range of other alternative financial instruments. These alternative investments rarely generate profits for investors and are generally unsuitable due to their excessive fees and costly structure. By offering brokers extra commissions, firms incentivize the sale of poor-quality investments, ultimately leading to a manipulated market driven by artificial demand.
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. It is the responsibility of brokers to inform investors that non-traded REITs deliver lower returns than treasuries and are both high risk and illiquid—but they frequently fail to do so. Because additional returns do not compensate investors for increased risk and illiquidity, these alternative investment products are hardly ever suitable 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.
Kavinsky has been in the securities industry for more than 13 years. Kavinsky has been registered as a Broker with Supreme Alliance LLC since 2024.
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.
