MASSACHUSETTS LAWSUIT AGAINST LPL FINANCIAL FOR REIT SALES PAVES THE WAY FOR SUCCESSFUL INVESTOR CLAIMS

A Massachusetts lawsuit against LPL Financial will surely strengthen investors' arbitration claims for losses resulting from illegal sales practices involving real estate investment trusts (REITs). Massachusetts Secretary of the Commonwealth William Galvin charged LPL with failure to supervise registered representatives who sold the non-traded REITs in violation of both state limitations and the company's guidelines. The Massachusetts securities division also charged LPL with dishonest and unethical business practices. Massachusetts charges stem from the sale of $28 million of non-traded REITs to almost 600 clients from 2006 to 2009. Of the REITs listed in the complaint, the highest sales were for Inland American Real Estate Trust, the largest non-traded REIT, with $11.2 billion in real estate assets. Robert Pearce, a 30-year securities and commodities attorney in Boca Raton, FL, believes that Massachusetts' action will certainly generate a flood of cases against LPL. Mr. Pearce added that the Massachusetts complaint will serve as a roadmap for investors and their attorneys to follow when asserting their claims.
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 long 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 factors associated with them.
In LPL's case, Massachusetts' investigation showed significant and widespread issues with LPL's adherence to product prospectus and state requirements. As a result, Massachusetts is seeking full restitution to clients who were sold REITs allegedly in violation of state and prospectus requirements. The state is also seeking an unspecified administrative fine against LPL. Although LPL set forth stringent requirements for the sale for non-traded REITs, it failed to properly review sales of non-traded REITs. In addition, the securities division was able to uncover similar issues with many other REITs sold by LPL. To counter the possibility of future violations, the firm has changed its policies and procedures, creating a separate complex-products team to review all alternative investments. Regardless of the measures taken by LPL, investors are urged to conduct their own investigation prior to making an investment decision involving non-traded REITs. That way, investors will have a clearer understanding of non-traded REITs, which just might keep them from buying the product from the get-go.
Have you suffered losses in real estate investment trusts sold by LPL Financial? 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.

MASSACHUSETTS TAKES AIM AT CROWDFUNDING AND CHARGES TWO FIRMS WITH FRAUDULENT AND UNREGISTERED SECURITIES SALES

The State of Massachusetts has recently filed fraud charges against two players in the up and coming arena of crowdfunding, which allows small private companies to sell equity directly to investors. Prodigy Oil and Gas LLC and Synergy Oil LLC, both out-of-state oil and gas operations, have been charged in connection with their sale of unregistered securities to Massachusetts investors. In one case, it is alleged that Prodigy Oil and Gas employed a cold-caller who had been found guilty of theft. The complaint also stated that Prodigy principal Shawn Bartholomae was subject to three state securities regulatory actions and two criminal charges. The complaint further alleged that Prodigy sold at least $464,000 in unregistered securities to a Massachusetts resident. In another case, fraud charges have been filed against Synergy Oil of Oklahoma and two of its executives allegedly involved in the sale of $35,000 of unregistered securities to two investors. Both companies, along with their officers and directors, were subject to securities orders in other states revoking their use of private placement exemptions.
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.
Although the Securities and Exchange Commission has yet to write crowdfunding rules, SEC officials have stressed that it is important to include meaningful and effective "bad actor" rules that will disqualify securities law violators, brokers with revoked licenses, and other fraud operators from using exemptions from the securities registration requirements. State securities regulators were against the measure and petitioned Congress not to sign off on the legislation. State regulators believe that the law was essentially opening the door for those with a history of defrauding investors.
Once crowdfunding gets the green light, deals must take place on SEC registered websites. Deals will also require numerous investors, not just one or two as in the Prodigy and Synergy cases. Legislation also requires an issuer to hit 100% of their capital raising target portrayed on an SEC-registered website.
Have you suffered losses in a fraudulent or misleading sale of unregistered securities? 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.

STATE SECURITIES REGULATORS COME DOWN HARD ON INVESTMENT ADVISER FIRMS FOR ABUSING SENIOR INVESTORS

The North American Securities Administrators Association (NASAA) has recently reported a major increase in enforcement actions against investment adviser firms last year along with a sharp rise in prison time for securities law violators. According to a NASAA enforcement survey taken every year, the number of enforcement actions involving investment adviser firms nearly doubled to 399 in 2011, which accounted for 15 percent of all enforcement actions handled by state securities regulators. One notable group of investors who faced financial abuses by investment adviser firms was seniors - nearly 600 reported enforcement actions were addressed. Even though state regulators are actively seeking to prevent investment advisers from performing abuses, 6,121 investigations were conducted in 2011, which led to 1,662 years in prison time for convicted violators - up 47 percent from the year before. The report is based on the results of a survey of NASAA members during the spring of 2012.
State securities regulators also took significant investor protection actions by taking away licenses from corrupt broker and investment advisers. In 2011, nearly 2,800 licenses were withdrawn resulting from state action - up 7.7 percent from the year before. In addition, 774 licenses were denied, revoked, suspended, or conditioned - up 20 percent from the previous year. Fortunately, state enforcement actions resulted in more than $2.2 billion in investor restitution orders in 2011 - Most of the restitution resulted from repurchases of auction rate securities stemming from state-led actions. Fines and penalties against investment advisers totaled $126 million.
Apart from the state regulators' efforts to protect senior investors from financial abuses, seniors cannot be urged enough to find a financial advisor or broker they can trust. Unfortunately, it can be difficult to tell whether the broker is acting in his or her best interest. That is why senior investors are also encouraged to employ a trustworthy and financially savvy third-party or family member to monitor a broker's recommendations. Senior investors who feel they are victims of financial abuse should seek the advice of an attorney to review their holdings and initiate an action to recover damages if they have suffered significant losses. All these measures will certainly help prevent significant losses well into retirement, which is when investors need to protect their hard earned money the most.
Do you believe you are a victim of financial abuse because of your status as a senior investor? 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 WARNS INVESTORS THROUGHOUT THE UNITED STATES ABOUT CROWD FUNDING INVESTMENTS

The North American Securities Administrators Association (NASAA), an organization comprised of the 50 state securities regulators, believes that the crowd funding provisions of the so-called JOBS Act are just another "Regulation D-like rip-off," according to InvestmentNews ("Crowd funding draws scorn from NASAA," by Mark Schoff Jr.). Regulation D provides a registration exemption for certain investments that are privately offered - i.e., not offered by means of a general solicitation to the public at large.

Under the JOBS Act, start-ups with no track record can raise up to $1 million online annually, via a public offering, without having to register with the U. S. Securities and Exchange Commission (SEC). In addition, the Act allows so-called emerging growth companies with less than $1 billion in revenue to make public offerings with no SEC registration.

Between 2007 and 2010, securities law violations related to private (Reg D) offerings resulted in 580 state enforcement actions, and were the leading regulatory problem in 2010. Part of the reason for this is the fact that state regulators are preempted from imposing a regulatory review requirement on private (Reg D) investments before they are offered to investors. State regulators will likewise be preempted from regulating crowd funding investments because the SEC is in charge of regulation.

But that could be a problem given lack of funding, inadequate resources and other problems at the SEC. "Based on the [Securities and Exchange Commission's] previous track record and their limited resources, this is a mandate the agency is not in a position to fulfill and hence an investor protection disaster waiting to happen," Jack Herstein, president of NASAA, wrote in a letter to Senators last month.

Other state regulators agree (as do some investment advisers, who cite the inherent risks of investing in unproven businesses and weak regulatory oversight). "I think it's absolutely another Reg D," Heath Abshure, Arkansas' securities commissioner, was quoted as saying, adding: "What this bill potentially does is take the worst parts of Reg D, make them worse and apply them to crowd funding."

SEC Chairman Mary Schapiro also expressed concerns about the JOBS Act, according to the article.
Unlike private (Reg D) offerings, a broker-dealer need not be involved in crowd-funding transactions, which means that there will be no reasonable-basis suitability analysis to protect investors.

"Investors are going to be bombarded with offers to invest. "There's going to be so much noise in this marketplace that legitimate companies are not going to be heard," Mr. Abshure was quoted as saying.
Allan Katz, president of Comprehensive Wealth Management Group LLC, reportedly described the JOBS Act as "a train wreck waiting to happen," and further noted that investors "have a hard time seeing through the clutter, deciding what's legitimate and what's not. You're not going to be able to ascertain all the risks when you're hearing the pie-in-the-sky upside without a downside."

One crowd-funding consultant anticipates billions of dollars in crowd funding offerings in the next 18 months, after the SEC writes the implementing regulations.

Startups reportedly will be able to get a "seal of approval" before they are placed on crowd funding portals if they submit to a background check by a due-diligence company such as the newly formed CrowdCheck Inc.

But how thorough and accurate will such due diligence be, and will all material risks and causes for concern about an investment be communicated to investors? A "seal of approval" could in itself be misleading and lull investors into a false sense of security.

Bottom line - Investors should exercise extreme caution before investing in crowd funding ventures.

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.