INVESTORS NATIONWIDE BEWARE OF ALTERNATIVE BOND FUNDS!

Alternative bond funds, which are typically touted as strategic-income funds, have been marketed to financial advisers or stockbrokers as a way to avoid the risk of rising interest rates, which concerns bond or fixed income investors. Most alternative bond funds, however, were unable to live up to that potential.

Generally, alternative bond funds have the ability to sell short and invest across a variety of markets in order to lessen the blow of rising rates, but those strategies came up short as the 10-year Treasury's yield shot up 46 basis points in May 2013. On average, the funds finished the month with a 0.46% loss. The largest alternative bond fund, the $26 billion Pimco Unconstrained Bond Fund (PUBAX), lost 0.54%, which was worse than the category's average.

Recent interest rate movements were the first real test for alternative bond funds, and the results were unremarkable. Nadia Papagiannis, a Morningstar Inc. mutual fund analyst, said "the reason for the one-month performance woes essentially boils down to the managers not being hedged against rising rates - the funds are basically long credit with the option to hedge." Ms. Papagiannis added that "most of the time, they're not hedged." So, what advisers in these funds are betting on is that the managers will be able to time the market when it comes time to hedge. "That's hard to do," Ms. Papagiannis said.

Have you suffered losses in alternative bond funds sold to you by your broker? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against stockbrokers who recommended unsuitable investments and unsuitable investment strategies that caused investors losses.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE - ACTIVELY TRADED ETFS WILL ADD RISK TO YOUR PORTFOLIO!

The Securities and Exchange Commission (SEC) recently unveiled a policy change that could have a major impact on an exchange traded fund's (ETFs) risk profile. In essence, the SEC has lifted its suspension on the use of derivatives by certain ETFs. This move is in response to pressure from the industry, and it is expected to result in a major increase in the number of actively managed ETFs. Managers will now be able to use derivatives in their investment strategies in order to hedge against risk. Problem is derivatives are also widely used to speculate in order to increase profits, which most certainly increases risk. Fortunately, the SEC is keeping its freeze in place for leveraged and inverse exchange traded funds - funds that can deal a bigger blow to investors because of their use of borrowed funds to increase profits.
ETFs are investment funds that are traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index and are attractive investments because of their low costs, tax efficiency, and stock-like features. By owning an ETF, investors benefit from the diversification of an index fund as well as the ability to purchase as little as one share. In addition, expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, investors pay the same commission to their brokers that they would pay on any regular stock order.
Investors should be concerned with the lifting of the derivatives suspension for ETFs because it will most likely affect management's investment strategy and investors' portfolios. Currently, there are 7,149 mutual funds and 1,444 ETFs. Approximately 6,836 mutual funds are actively managed, and only 54 ETFs are actively managed thus far. With expectations of a rise in actively traded ETFs, Investors and their advisors should review their ETF holdings for any changes in investment strategy and determine whether it is suitable for them. That way, investors can avoid learning the hard way what actively traded ETFs are all about and prevent future monetary losses.
Have you suffered losses resulting from actively traded ETFs? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against stockbrokers who misrepresented and sold unsuitable investments such as actively traded ETFs to investors.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

UBS WILLOW FUND LIQUIDATES SHARES LEAVING INVESTORS WITH 20 CENTS ON THE DOLLAR

In October 2012, the UBS Willow Fund, a distressed debt hedge fund, informed investors that the fund would be liquidated after having sustained substantial losses. Formed in 2000, UBS Willow has suffered losses exceeding $300 million, which date back to 2007 - its net asset value (NAV) per share was down 80 percent upon UBS Willow's liquidation announcement. In December 2012, a class action lawsuit was filed against UBS Willow alleging a deviation from the fund's investment strategy. The lawsuit, filed in Manhattan, seeks to recover over $200 million for investors who have lost money in the fund. Meanwhile, the Law Offices of Robert Wayne Pearce, P.A. is currently investigating the broker-dealers and financial advisors that marketed and sold the product to investors. Our attorneys are researching potential claims that will hold broker-dealers and financial advisors liable for recommending UBS Willow and recover additional losses resulting from the investment.
Hedge funds are similar to mutual funds in structure. Investor money is pooled together and invested in an effort to make a positive return. However, hedge funds have more flexible investment strategies than mutual funds. Hedge funds seek to profit in all kinds of markets by utilizing strategies involving leverage, short-selling, and other speculative investment practices that are not typically used by mutual funds. Another factor that distinguishes hedge funds from mutual funds is that hedge funds are not subject to the same regulations designed to protect investors. Depending on the amount of assets in the hedge funds advised by a manager, some hedge funds may not be required to file reports with the SEC. Fortunately, hedge funds are subject to the same prohibitions against fraud as are other market participants. In addition, managers owe a fiduciary duty to the funds under management.
Broker-dealers have a duty to perform adequate due diligence, especially when offering risky investments such as hedge funds, to ensure that the investment is suitable for an individual investor's age, risk tolerance, investment experience, net worth, and investment time horizon. If broker-dealers fail to carry out this duty, they can be liable to investors for damages. In the case of UBS Willow, it is evident that financial advisors made certain misrepresentations about the product's risks and investment strategy. As a result, investors who have suffered losses are encourage to file arbitration claims to recover any losses stemming from UBS Willow.
Have you suffered losses resulting from owning shares in the UBS Willow Fund? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against stockbrokers who misrepresented and sold the UBS Willow Fund to investors.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WHY WOULD YOU WANT TO INVEST IN HEDGE FUNDS?

Warren Buffett has called hedge funds "manager compensation schemes." According to a recent article in The Economist, "Rich Managers, Poor Clients," investors pay for manager expertise, but controlling costs is a better way of having a successful investment than betting on a manager's track record. Some hedge funds charge performance fees of 20% of the gains plus another fixed 2-3% management fee regardless of whether the fund is profitable - a total of 22% in fees. In other words, the hedge fund would have to gain over 22% for investors just to breakeven. The only way to achieve those types of returns is to take extraordinary risk with your investment capital. As The Economist article stated: "It is easy to think of people who have become billionaire's by managing these hedge funds; it is far harder to think of any of their clients who have got as rich."
It is not only the costs associated with hedge funds that trouble me. The reality is they have performed poorly over the last 10 years, while they have made hedge fund managers very wealthy. As measured by the HFRX Indices (widely used benchmarks for hedge fund performance), hedge funds returned just 3% in 2012 compared to an 18% return of the S & P 500 stock Index. The major problem all hedge funds suffer these days is that they have attracted so much money that they cannot invest as they did in the past. There are too many dollars chasing too few market opportunities. And now, hedge funds are "going retail" and becoming widely available to small investors in Funds of Funds and becoming embedded in variable annuities, pension funds, endowments, foundations and other retirement plans. There are nearly 8000 hedge funds on the market and more coming online every day.
The biggest problem we have with hedge funds is a lack of transparency and the lack of due diligence that many brokers perform prior to offering and selling these investments to their biggest and best clients. The complexity and lack of transparency of hedge funds makes them the vehicle of choice for fraudsters. The United States Securities and Exchange Commission (SEC) has become especially concerned and set up a special unit "The Market Abuse Unit" to investigate the problems and abuses in the hedge fund industry. The SEC and the attorneys at our law firm are concerned about unregistered investment advisers engaging in general solicitations to unaccredited investors to put their capital in unregistered hedge funds. Too many retired, income-oriented investors, in search of higher yields have been misled into a number of hedge fund frauds such as the MAT/ASTA funds offered by Smith Barney and Citibank advisers.
Have you suffered losses resulting from an investment in any hedge fund? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against hedge fund salespersons who fraudulently offered and sold the fund to investors.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WELLS TIMBERLAND REIT BLAMES STILL-DISMAL HOUSING INDUSTRY FOR AXE TO SHARE PRICE

Wells Timberland REIT Inc. has recently issued an estimated per share value of $6.56 in their real estate investment trust (REIT), which invests in working timberland. The shares were offered to the public at $10 when the REIT was launched in 2006. Wells Timberland blamed the 35 percent drop in share price value on the still-dismal housing industry. Wells Timberland REIT is sponsored by Wells Real Estate Funds, one of the largest firms in the arena of non-traded REITs. It has invested more than $11 billion in real estate for more than 300,000 investors. The $6.56 share price valuation was based on information as of September 30, 2012, which in all probability is not a realistic exit price available to investors due to the illiquid nature of the REIT.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for longs periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Non-traded REITs are not listed or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Non-traded REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factor associated with them.
Wells Timberland's 8-K filing with the Securities and Exchange Commission lists timber assets of $11.70 per share, $0.28 of other assets per share, and debt and preferred equity liabilities of $5.42. Although the board of directors used appraisal information from a forest consulting firm and a certified public accountant, it made the final estimate itself. In October, the trust suspended redemptions of shares until the new estimate of share values was completed. Beginning in January, investors will be able to redeem shares for 95% of the estimated value - or $6.23. However, Wells Timberland pays for redemptions out of its distribution reinvestment plan, and because it has made no cash distributions, it has also not made any ordinary share redemptions.
Have you suffered losses in the Wells Timberland REIT? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

MORGAN STANLEY AGREES TO PAY $5 MILLION FOR WITHHOLDING INFORMATION RELATED TO FACEBOOK IPO

Morgan Stanley has agreed to pay a $5 million fine to settle charges by the State of Massachusetts for its role in the Facebook initial public offering (IPO). Massachusetts regulators claimed that a senior investment banker at Morgan Stanley helped Facebook officials update analysts about lower revenue forecasts during private calls on May 9, 2012 - information not given to investors. Massachusetts claims that the investment banker drafted a script used by Facebook's treasurer while the phone calls were made to analysts only minutes after filing an update with the Securities and Exchange Commission (SEC). The script said that revenues for the second quarter would be "on the lower end of our 1.1 to 1.2 [billion dollar] range" and "over the next six to nine months could be 3% to 3.5% off the 2012 $5 billion target," stated the consent order. Both of these specific targets were not mentioned in the SEC filing. In addition, the consent order alleged failure to supervise analysts under the 2003 global research analyst settlement.
An IPO is a type of offering where shares of stock in a private company are sold to the general public on a securities exchange for the first time. Initial public offerings are used by companies to raise capital and to become publicly traded enterprises. A company selling shares is never required to repay the capital to its public investors. After the IPO, when shares trade freely in the open market, money passes between public investors. Although an IPO offers many advantages, there are also significant disadvantages such as the costs associated with the requirement to disclose certain information that could prove helpful to competitors, or create difficulties with vendors. Details of the proposed offering are disclosed to potential purchasers in the form of a lengthy document known as a prospectus. Most companies undertaking an IPO do so with the assistance of an investment banking firm acting in the capacity of an underwriter. Underwriters provide a valuable service, which includes help with correctly assessing the value of shares and establishing a public market for shares.
Regardless of the revenue downgrades, the price and quantity of Facebook's IPO were pushed up by bullish investors who were ignorant of the downgrades. The company went public on May 18, 2012 at $45 per share, but shares immediately sold off to settle around $38 per share. Facebook shares fell further, touching the $17 dollar range after the bad news was digested in the marketplace.
Have you suffered losses on your purchase of Facebook IPO shares? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

NASAA SEES SHARP RISE IN CROWDFUNDING WEBSITES AND ANTICIPATES WIDESPREAD ONLINE FRAUD

The North American Securities Administrators Association (NASAA) has reported a sharp rise in crowdfunding in recent months in expectation of rules, which would allow small businesses to raise capital online. As a result, investors can expect to be inundated with crowdfunding pitches, legitimate or otherwise. State securities regulators conducted an analysis of internet domain names that found nearly 8,800 domains with crowdfunding in their names as of late November 2012 - up from less than 1,000 at the beginning of the year. Of the 8,800 websites, 2,000 contained content, over 3,700 had no content, and more than 3,000 appeared to be serving as placeholders to reserve a domain name for future use or sale. Since the signing of the Jumpstart Our Business Startups (JOBS) Act in April 2012, about 6,800 domains with crowdfunding in their name have appeared.
Crowdfunding consists of an online money-raising strategy that invites the public to allocate money, oftentimes through social networking websites, to help finance projects or causes. Through the JOBS Act, small businesses and entrepreneurs will be able to sell equity directly to investors in order to finance their business ventures as soon as the Securities and Exchange Commission (SEC) adopts rules. A crowdfunding equity raise can have an unlimited number of investors but is limited to $1 million. These rules are expected to go into effect sometime in 2013.
In anticipation of an increase in online fraud schemes stemming from the passage of the JOBS Act, NASAA has initiated a task force on internet fraud to monitor crowdfunding and other offerings over the internet. Currently, NASAA is coordinating multi-jurisdictional efforts to scan various online offering platforms for fraud, and where authorized, it will coordinate investigations into online capital raising fraud. In addition, NASAA members are being trained in the use of online data mining tools developed by the staff of the Enforcement Division of the New Brunswick Securities Commission to help identify potentially fraudulent websites. The task force is also working with NASAA's Investor Education Section to put together investor and industry awareness programs covering crowdfunding.
Have you suffered losses in a fraudulent or misleading crowdfunding deal? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE - EXCHANGE-TRADED NOTES CARRY UNPLEASANT SURPRISES!

The Financial Industry Regulatory Authority (FINRA) has recently raised concerns about disclosure and sales practices involving Exchange Traded Notes (ETNs). Of primary concern is the number of clients not suited for the risks associated with ETNs, but who still were recommended ETNs by their brokers. As a result, FINRA has issued a regulatory notice to provide broker-dealers with guidance on how to oversee the sale of complex products such as ETNs that are difficult for retail investors and brokers to understand. Firms are now required to make sure that their marketing materials fairly disclose risks, and that supervisors and registered representatives are trained to understand the risks associated with ETNs. FINRA also warned that ETNs have little or no performance history, their investment indexes and investment strategies are complex, their returns have the potential to be volatile, and the price given by the issuer can vary significantly from the price on the secondary market.
ETNs are a type of debt security that trade on exchanges and offer a return linked to a market index or other benchmark. Unlike exchange traded funds (ETFs), ETNs do not buy or hold assets to duplicate the performance of the underlying index - some of the indexes and investment strategies used by ETNs can be complex and without much performance history. The return on an ETN generally depends on price changes if the ETN is sold prior to maturity, as with stocks or ETFs, or on the payment of a distribution if the ETN is held to maturity. An ETN's closing value is calculated by the issuer and is distinct from an ETN's market price, which is the price at which an ETN trades in the secondary market. Investors should understand that an ETN's market price can significantly deviate from its indicative value. Therefore, investors should avoid buying ETNs that are trading at a premium to its closing or intraday indicative value.
Investors should keep the following risks associated with ETNs before making an investment decision:
-Credit Risk: ETNs are unsecured debt obligations of the issuer.
-Market Risk: As an index's value changes with market forces, so will the value of the ETN in general, which can result in a loss of principal to investors.
-Liquidity Risk: Even though ETNs are exchange-traded, a trading market may not develop.
-Price-Tracking Risk: Investors should be wary of buying at a price that varies significantly from closing and intraday indicative values.
-Holding-Period Risk: Some leveraged, inverse and inverse leveraged ETNs are designed to be short-term trading tools, and the performance of these products over long periods can differ significantly from the stated multiple of the performance of the underlying index or benchmark during the same period.
-Call, Early Redemption, and Acceleration Risk: Some ETNs are callable at the issuer's discretion.
-Conflicts of Interest: The issuer of the notes may engage in trading activities that are at odds with investors who hold the notes - shorting strategies, for example.
Have you suffered losses resulting from exchange-traded notes recommended by your broker? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE - BROKER-DEALER SELF-OFFERINGS ARE RISKY INVESTMENTS!

Broker-dealers oftentimes use broker-dealer self-offerings (BDOs) to raise capital by selling their own or an affiliate's securities. Typically BDO offerings come in the form of registered public offerings or private placements. Even though BDOs can be a legitimate investment, potential for abuses still exist. Prior actions have been brought against broker-dealers and financial advisors that have sold more than $36 million in BDOs to clients that involved fraud or other serious misconduct - numerous cases involved high pressure sale tactics targeting elderly or retired investors. Thus, investors are encouraged to consider the risks associated with investing in BDOs and the possibility of fraud or other misconduct before buying their broker.
When an investor purchases a private BDO, they are investing in the brokerage firm itself. Money raised in a BDO offering is usually used to finance a brokerage firm's operations. Therefore, the investor shares the risks that business will be unprofitable in the near future. The Securities and Exchange Commission (SEC) places limitations on the way private BDOs can be sold to investors. For example, brokerage firms are not permitted to advertise the BDO, and the number of small investors to whom the securities can be offered is limited in number. The BDO securities sold are not registered with the SEC or filed with FINRA, and they are not publicly traded. Consequently, private BDOs are subject to fewer disclosure requirements and regulations than registered public offerings. Private BDOs are also highly illiquid investments.
Investing in a private BDO can involve significant risks, especially when a private BDO has been announced through emails or cold calling, which may be a clear sign of a fraudulent offering. Investors can avoid the risks associated with investing in BDOs by considering a few very important points. First, the offering may be illegal if the brokerage firm did not register the BDO with the SEC, which means it was not subject to a Regulation D exemption. To meet the Regulation D exemption, the BDO cannot be advertised to the general public. Second, the reason that a brokerage firm is conducting a private BDO is because the firm is not a public company. So, there is no guarantee when, or even if, there will be a public market for the securities. Even if a company goes public through an initial public offering (IPO), federal and state laws often require that unregistered or private securities acquired in transactions such as BDOs be held for a year or more before they can be sold. Last, when an investor buys a private BDO, the brokerage firms is getting all the investor's money rather than just a commission. The brokerage firm might be selling the BDO to benefit from the offering in a certain way - the firm has been losing money or it needs cash reserves to meet regulatory requirements.
Investors should also consider the following red-flags:
-Cold-Calling or Spam: Brokers selling problematic private BDOs often use unsolicited telephone calls or email to sell private BDOs.
-High Pressure Sales Tactics: Dishonest brokers often use boiler room sales tactics, hounding investors to invest in BDOs/
-Initial Public Offering is Imminent: Investors should be wary of brokers who tell you that in the near future the brokerage firm will conduct an IPO, which will reap large profits once the securities are traded on the open market.
-Promises of Unusually High Returns: Brokers make optimistic price projections about future performance with no research to back up their assertions.
-Risk-free Investments: Some private BDO frauds involve promises that you cannot lose money.
Refusal to Provide Current Financial Documents on Request: Brokers should supply financial and other supporting materials upon a client's request.
Brokerage firms that use the above mentioned tactics oftentimes provide little or no supervision of their salespersons. Such firms may materially misrepresent experience and financial soundness of the company to attract investors. Firms will also go as far as omitting information about disciplinary actions against the firm or individuals associated with the firm.
Have you suffered losses in a broker-dealer self-offering? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE - PROMISSORY NOTES ARE NOT SO PROMISING!

Securities and Exchange Commission (SEC) investigations have revealed that promissory note scams are on the rise. In fact, promissory note schemes have robbed hundreds of investors of tens of millions of dollars. The promise of high guaranteed rates of interest combined with today's volatile markets should alarm investors to make an adequate investigation before investing. This is because unlike many investments today, promissory notes tout a simple and safe concept, but they also offer returns as high as 25 percent. Even though they can be legitimate investments, some promissory notes sold widely to individual investors turn out to be fraudulent. Therefore, investors need to fully understand the promissory note they are considering, and they need to be aware of warning signs that may signal a scam.
A promissory note is a debt instrument that companies use to raise capital. The company issues the notes and promises to return the purchaser's funds and to make interest payments to the buyer in exchange for the borrowed money. Promissory notes have set repayment periods ranging from a few months to several years. Legitimate promissory notes oftentimes face significant risks - the issuing company may have problems such as competition, bad management, or severe market conditions that make it nearly impossible for the company to fulfill its promise to pay interest and principal to note buyers. Investors should also note that bona fide notes are marketed almost exclusively to corporate and other sophisticated investors, who have the resources and expertise to make a sound investment decision.
Problems with promissory notes fall into three main categories: fraud and deception, unregistered securities, and unregistered sellers. Fraudulent promissory note programs often consist of deceptive statements to lure in investors. Callers tout high, guaranteed returns and collateral to back the notes. Promissory note schemes usually target the elderly and their retirement savings. Promissory notes must be registered with the SEC or the state in which they are sold if they are not subject to a registration exemption. If the note is unregistered, it will not be subject to review by regulators before it is sold, and investors have to do their own research to verify that the company can meet its obligations. If registered brokers are involved, they may be selling the notes without a license or without their firms' approval.
Investors should consider the following before investing in a promissory note:
-Ask why the seller wants to sell to you: Bona fide corporate promissory notes are generally sold to sophisticated investors. The fact that promissory notes are being sold to individual investors is itself a danger signal.
-Be wary of pushy sales tactics: No reputable investment professional should push an investor to make an immediate decision about an investment or tell you to act now.
-Use on-line resources: The SEC's EDGAR Database and the state's securities regulator offer information on whether the notes are registered. The Financial Industry Regulatory Authority's (FINRA) BrokerCheck will reveal if the individual selling the promissory notes is registered or has a disciplinary history.
-Broker role: The promissory note should be sold through the broker's firm. If not, it is being "sold away," which means that the associated broker-dealer has not approved the note for sale.
-Guaranteed returns: Salespersons cannot guarantee returns. Even if the seller says that the promissory notes are insured, be wary - the insurer may not be legitimate or offshore.
-High returns: Promissory notes usually offer double digit returns - those greater than 10 percent while other fixed income investment are yielding much less. The rule is: the higher the return, the greater the risk.
-Commissions: The salesperson's commission is important. Normal commissions rarely exceed 5 percent. Promissory notes offer much more - as high as 30 percent or more.
-Issuing Company: How the company issuing the promissory notes plans on generating returns to make the interest payments should be vital to an investor's decision to commit to the notes.
Have you suffered losses in a promissory note investment scam? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

ET - SYNTHETIC ETFS - GO HOME!

Synthetic ETFs are complex, very risky, require active analysis and monitoring and are not suitable for the average long-term "buy and hold" retail investor. A synthetic ETF can be a basket of investments involving stocks, bonds, commodities, currencies, options, swap contracts, swaptions, commodities futures contracts and other derivative instruments that track the performance of an underlying Index or market sector. The synthetic ETFs du jour fall in three categories: Leveraged ETFs, Inverse ETFs and Leveraged Inverse ETFs.
Leveraged ETFs use financial derivatives and debt to multiply the returns of an underlying Index. The managers of Leveraged ETFs attempt to maintain a constant amount of leverage throughout the investment at a 2:1 or 3:1 ratio. The manager's goal is to enhance the returns; if the underlying index returns 1%, the fund should theoretically return 2%. However, the leverage ratio increases the losses in a similar manner, a drop of 1% in the index would result in a 2% loss in the ETF managed on a 2:1 leverage ratio.
Inverse ETFs, also called "short" funds, use various financial derivatives to profit from a decline in the value of an underlying index. Investing in an Inverse ETF is similar to holding various short positions in order to profit from falling prices. An Inverse ETF that tracks a particular index seeks to deliver the inverse of the performance of that index. Inverse ETFs are often marketed as a way for investors to hedge their exposure in rapidly moving markets.
Leveraged Inverse ETFs, also called "ultra short" funds, seek to deliver return that is a multiple of the inverse performance of the underlying index. For example, a 2:1 leveraged inverse ETF attracts a particular index seeks to deliver double the inverse of that index's performance.
Leveraged and Inverse ETFs are intended as short-term investments. They are not meant to be held for longer periods of time. If held for more than one day, their performance can differ significantly from their stated objectives due to liquidity and other management performance issues. Leveraged and Inverse ETFs have also become the new tool of brokers seeking to turn clients' accounts to maximize their commissions. Leveraged inverse ETFs also require daily resets internally that make them less tax efficient than traditional ETFs.
Synthetic ETFs are unsuitable for most retail investors. The mantra for the long term "buy and hold" investor should be ET-Synthetic ETF-go home! If you have suffered losses investing in any Synthetic ETF then you should call the Law Offices of Robert Wayne Pearce P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

TEXAS INVESTORS SHOULD BEWARE OF LIFE PARTNERS VIATICAL SETTLEMENTS

The Securities and Exchange Commission (SEC) is investigating Life Partners Holdings Inc., a Texas based company, for arranging several billions worth of viatical settlements sales. The SEC's main concern is how Life Partners calculated its mortality estimates, which is what investors use to value a viatical settlement investment. This comes as no surprise since 90% of the insured individuals, many of whom were HIV positive, outlived company estimates.

A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.

Shorter mortality estimates would result in an investor anticipating lower costs and a higher return on investment. In the case of Life Partners, almost all of the insured individuals lived beyond the company's estimates, which forced higher costs and lower returns upon investors. This led the SEC to investigate a Nevada physician, who was responsible for calculating mortality rates for Life Partners. After its investigation, the SEC concluded that one Dr. Cassidy used an unrealistic approach that produced short life expectancies.

Companies like Life Partners do better than the clients they purport to serve. Life Partners has sold 6,400 policies worth $2.8 billion to 27,000 clients since 1991. Also, fees to Life Partners have averaged as high as $308,000.00 per policy in some years. In return, investors were told they would earn 10 to 15% on their money, which was not the case since returns were driven down due to longer than expected mortality rates. Clearly, viatical settlements were made to benefit Life Partners' bottom line.

Brokers have a duty to make recommendations that are suitable for its clients. This duty includes informing clients of the risks associated with an investment. If brokers fail to adhere to their duties, their brokerage firms can be held liable to investors for damages even if they did not know of the brokers' conduct.

Have you suffered a loss in a viatical settlement? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WAS THE HINES REAL ESTATE INVESTMENT TRUST AN UNSUITABLE INVESTMENT?

Many investors have been calling my office and asking whether Hines Real Estate Investment Trust was an unsuitable investment for them. Hines Real Estate Investment Trust is a non-traded Real Estate Investment Trust (REIT). For most investors, liquidity, income and risk tolerance are a concern but if you are elderly and retired they are paramount! If you have limited resources and no ability to generate income from other sources to meet your liquidity and income needs then a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investors' portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!

Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of individuals in stating investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").

The primary cause of the increased number of telephone calls to our office over the last five years is many elderly and retired investors have been steered into non-traded REIT investments as the yields on other income producing investments have steadily declined. According to many investors, the REITS were recommended as safe, secure, and steady income producing investments which sounded to be exactly what many seniors wanted and needed. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market, early redemption of shares in REITs is often very limited, and the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.

When any Hines Real Estate Investment Trust investor calls our office, we will make a customer specific suitability determination after we learn the "essential facts" concerning that investor. We will ask, just as their stockbroker should have asked, about their age, investment experience, time horizon liquidity needs (length of time they could hold the investment without need for the principal), risk tolerance, other holdings, and financial situation in terms of liquid total net worth, tax status and investment objectives. All of these factors are relevant to suitability and determination and most weigh against the ownership of REIT investments by elderly retired investors. If we believe a brokerage firm or its representatives made an unsuitable recommendation that any person invest in a non-traded REIT, we recommend that they file a FINRA arbitration claim and attempt to recover their losses!

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE OF BNI TENANT-IN-COMMON INVESTMENTS

Broker-dealers are at the forefront of an ongoing investigation into BNI tenant-in-common investments (TICs). This is attributable to the broker-dealers' failure to conduct adequate due diligence prior to offering and selling the TIC investment to their clients. Therefore, brokers misrepresented the product as a safe and guaranteed investment, with returns ranging from 7 to 12%. The results were hefty commissions for brokers, while clients were left with unsuitable and risky real estate investments in the midst of a property bubble.

TICs are investment vehicles that allow individual investors to buy shares of real estate interests directly, rather than shares of stock, bond certificates, or other forms ownership. Properties can include a high-rise office building, a retail center, a triple-net lease from a national drugstore chain, oil or gas wells, or any other type of investment property. Investors are attracted to TICs because they can purchase an interest in expensive properties - typically $30 million or more in value. Over the past decade, TICs have become popular among retail investors. This is partially attributable to the IRS' rule amendment, which allows investors to avoid capital gains taxes by investing property sale proceeds into TICs.

Due diligence requires a reasonable investigation of all material facts before entering into an agreement or transaction with another person or entity. It is a measure taken to prevent unnecessary harm to an innocent party. In many instances, broker-dealers do not perform sufficient due diligence prior to offering products such as tenant-in-common investments. If broker-dealers do not perform their due diligence, they risk misrepresenting the true nature of the product and placing clients in an unsuitable investment. As a result, an investor can claim damages against the broker-dealer that sold the BNI TIC for not performing its due diligence prior to the offer and sale.

Have you suffered a loss in a BNI tenant-in-common investment? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WAS THE AMREIT REAL ESTATE INVESTMENT TRUST AN UNSUITABLE INVESTMENT?

Many investors have been calling my office and asking whether AmREIT Real Estate Investment Trust was an unsuitable investment for them. AmREIT Real Estate Investment Trust is a non-traded Real Estate Investment Trust (REIT). For most investors, liquidity, income and risk tolerance are a concern but if you are elderly and retired they are paramount! If you have limited resources and no ability to generate income from other sources to meet your liquidity and income needs then a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investors' portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!

Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of individuals in stating investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").

The primary cause of the increased number of telephone calls to our office over the last five years is many elderly and retired investors have been steered into non-traded REIT investments as the yields on other income producing investments have steadily declined. According to many investors, the REITS were recommended as safe, secure, and steady income producing investments which sounded to be exactly what many seniors wanted and needed. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market, early redemption of shares in REITs is often very limited, and the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.

When any AmREIT Real Estate Investment Trust investor calls our office, we will make a customer specific suitability determination after we learn the "essential facts" concerning that investor. We will ask, just as their stockbroker should have asked, about their age, investment experience, time horizon liquidity needs (length of time they could hold the investment without need for the principal), risk tolerance, other holdings, and financial situation in terms of liquid total net worth, tax status and investment objectives. All of these factors are relevant to suitability and determination and most weigh against the ownership of REIT investments by elderly retired investors. If we believe a brokerage firm or its representatives made an unsuitable recommendation that any person invest in a non-traded REIT, we recommend that they file a FINRA arbitration claim and attempt to recover their losses!

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE - CHURCH BONDS ARE RISKY AND ILLIQUID INVESTMENTS!

The Financial Industry Regulatory Authority (FINRA) is concerned about sales of church bonds through inappropriate sales practices by brokers. This matter has earned church bonds a spot on FINRA's list of examination and enforcement priorities for 2012. Inappropriate sales of church bonds are usually affiliated with affinity fraud, making it somewhat easier for scam artists to hide the real risks associated with the bonds. This is why FINRA is initiating efforts to prevent broker misconduct and to make sure that firms are performing their due diligence, which will ultimately aid it protecting investors' assets.
Church bonds have numerous risks and problems. Among the risks associated with the bonds is their lack of liquidity. Liquidity issues arises because church bond issuances are small ($10 million or less), which translates into a lack of any secondary market for the bonds to trade in. In addition, the true financial condition and creditworthiness of church bond issuers are difficult to determine because their underlying source of revenue is never really clear. Still, church bond salespersons have been able to capitalize on the low interest rate environment and the desire for a relatively secure source of income, primarily by retirees - the impact of an increasing number of church bond defaults on retirees' investment portfolio has been devastating. This unfortunate reality was sparked by the general economic decline, which hindered the ability of many churches to pay their debt due to a slowdown in church donations.
The law requires broker-dealers and investment advisers to perform adequate due diligence before recommending investments such as church bonds to their clients. Some of the responsibilities include: 1) having a reasonable basis to believe that the investment is suitable; 2) examining the risks associated with the investment; and 3) making full disclosure of the risks associated with the investment. Unfortunately, these responsibilities often go unfulfilled. Therefore, investors can bring forth claims against broker-dealers for losses incurred.
Affinity fraud is a form of illegal conduct typically associated with an appeal to a common interest. Some examples of a common interest include a church, club, and cultural association. Scam artists target and exploit the tendency of members to ascribe to the trustworthiness of a fellow member. In the case of a church, scam artists pitch the notion that the funds will be to support the mission of the church.
Have you suffered losses in church bonds? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WAS THE DESERT CAPITAL REAL ESTATE INVESTMENT TRUST AN UNSUITABLE INVESTMENT?

Many investors have been calling my office and asking whether Desert Capital Real Estate Investment Trust was an unsuitable investment for them. Desert Capital Real Estate Investment Trust is a non-traded Real Estate Investment Trust (REIT). For most investors, liquidity, income and risk tolerance are a concern but if you are elderly and retired they are paramount! If you have limited resources and no ability to generate income from other sources to meet your liquidity and income needs then a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investors' portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!

Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of individuals in stating investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").

The primary cause of the increased number of telephone calls to our office over the last five years is many elderly and retired investors have been steered into non-traded REIT investments as the yields on other income producing investments have steadily declined. According to many investors, the REITS were recommended as safe, secure, and steady income producing investments which sounded to be exactly what many seniors wanted and needed. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market, early redemption of shares in REITs is often very limited, and the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.

When any Desert Capital Real Estate Investment Trust investor calls our office, we will make a customer specific suitability determination after we learn the "essential facts" concerning that investor. We will ask, just as their stockbroker should have asked, about their age, investment experience, time horizon liquidity needs (length of time they could hold the investment without need for the principal), risk tolerance, other holdings, and financial situation in terms of liquid total net worth, tax status and investment objectives. All of these factors are relevant to suitability and determination and most weigh against the ownership of REIT investments by elderly retired investors. If we believe a brokerage firm or its representatives made an unsuitable recommendation that any person invest in a non-traded REIT, we recommend that they file a FINRA arbitration claim and attempt to recover their losses!

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

CAN I RECOVER MY COLE REAL ESTATE INVESTMENT TRUST LOSSES?

Many investors in the non-traded Cole REITs have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. As a result, many claims are being filed by Cole REIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in Cole REIT and other REIT investments to recover their REIT losses.

At first blush, one may think that the best claim is against the Cole REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Cole REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.

The most common misrepresentation and misleading statement claims that the Cole REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that Cole REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Cole REIT and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are a Cole REIT investor with the same complaints, we believe we can help you recover your REIT losses!

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT NON-TRADED REIT INVESTORS: YOU ARE DESTINED TO LOSE!

According to a study performed by BlueVault Partners LLC and the University of Texas at Austin's McCombs School of Business, non-traded REITS consistently underperform the broad market of real estate investing in large part because of the high fees and commissions associated with these investments (the fees for non-traded REITs are often as high as 12-15%). The study found that 70% of the non-traded REITs included in the study underperformed basic benchmarks. The study is particularly timely as the initial public offering market for non-traded REITs, known in the industry as a "liquidity event" or "going full cycle," has heated up this year. Since March, three non-traded REITs have listed on exchanges, with more likely to come, each with limited to no success.

Notwithstanding the poor track record of these investments, brokerage firms have only increased the sale of such products. According to an executive summary of the study performed the non-traded REIT industry had $84 billion in assets under management at the end of 2011 (representing huge growth in the industry). Certainly, an inference can be made that the industry is actively looking to grow this investment area because of the very commissions that makes it so difficult for these investments to succeed.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

THE SEC CONTINUES ITS EFFORTS TO PROTECT SENIOR INVESTORS NATIONWIDE AGAINST VIATICAL SETTLEMENT SCAMS

The Securities and Exchange Commission (SEC) is continuing to focus on the sale and marketing of retirement products to help combat fraud against senior investors. These efforts stem from the fact that seniors are oftentimes sold unsuitable investments because a broker has failed to disclose or misrepresented the risks associated with a product. One such product is a Viatical settlement, which is among the SEC's top priorities since the industry has experienced stellar growth and will likely surpass $150 billion in value within the next few decades.

A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.

Viatical settlements are of emerging interest since they may very well become Wall Street's next big securitized products. Still, the SEC has limited authority over viatical settlements. A task force has been established to examine whether sufficient regulation is in place to protect senior investors against fraudulent activity. Apart from fraud, the SEC has expressed concern that many seniors may not understand the consequences of selling their life insurance policies to investors. These consequences include the loss of tax benefits and the inability to obtain life insurance in the future.

Have you suffered a loss in a viatical settlement? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.