Investor's Rights Blog with Robert Pearce

Apr 9, 2025

FINRA Concerned About Conflicts of Interest and Complex Products Sold to Investors Throughout the United States

Speaking to attendees at the Financial Industry Regulatory Authority’s (FINRA’s)annual meeting, its Chairman and CEO Richard Ketchum, reportedly remarked that broker dealers need to do a better job to “assess and disclose” their conflicts of interest, and to inquire whether sales practices “put your firm’s or employees’ interests ahead of investors’.” Broker-dealers’ conflicts of interest and the proliferation of complex financial products being sold by financial advisers are the top areas of concern to the FINRA.

Apr 9, 2025

Morgan Stanley Makes Millions – Facebook Investors Throughout Florida and the Country Lose Their Shirts

In addition to substantial IPO fees, the Facebook underwriters headed by Morgan Stanley made “a profit of about $100 million” through an options bet which benefits the banks when the IPO price is too high and the stock value plummets. (See “Morgan Stanley, Others Make Profit of $100 Million Stabilizing Facebook,” Gina Chon, Aaron Luchetti and Ryan Dezember, The Wall Street Journal). This profit comes at the expense of individual investors who buy the overpriced stock at or above its initial purchase price.

Apr 9, 2025

Apple REIT Arbitration Award Helps Investors Nationwide Suffering Losses in Non-traded REITs

The first of many cases involving sales of Apple REITS by David Lerner Associates Inc. has resulted in an arbitration award in favor of the aggrieved investors, Joseph Graziose and Florence Hechtel. The decision will help hundreds of other claims already filed or likely to be filed against the firm over the investments. David Lerner Associates also faces a FINRA enforcement action over its sales of nearly $7 billion of Apple REITs. Lerner Associates received fees and commissions related to the Apple REITs of approximately $600 million, which accounted for 60% to 70% of its revenues since 1996. A Financial Industry Regulatory Authority (FINRA) arbitrator ordered the firm to pay them back $24,450 for their shares of Apple REIT Nine, and to reimburse them for the $425 FINRA filing fee.

Apr 9, 2025

Margin Loans Are Dangerous For All Investors in Florida and Countrywide!

Margin involves the use of borrowed money to buy assets, usually securities. It adds layers of risk to a portfolio. It amplifies losses as well as gains, and it subjects the customer to margin calls if the account value (which is the collateral for the margin loan) drops below a certain level.

Apr 9, 2025

SEC “Waivers” and “Favors” for Wall Street

U.S. District Court Judge Jed Rakoff threw light on the Securities and Exchange Commission’s longstanding practice of allowing firms that it has accused of fraud to buy their peace without admitting wrongdoing. He refused to approve a settlement agreed to Citigroup and the SEC in which Citigroup consented to, but expressly neither admitted nor denied, the charges. Judge Rakoff found that to be against the public interest. Both the SEC and Citigroup appealed the decision to the court of appeals.

Apr 9, 2025

FINRA Fines Citigroup Over Mortgage Reports

The Financial Industry Regulatory Authority (FINRA) recently announced that it has fined Citigroup Global Markets, Inc. $3.5 million for providing inaccurate mortgage performance information, supervisory failures and other violations in connection with subprime residential mortgage-backed securitizations.

Apr 9, 2025

David Lerner Associates Loses First of Hundreds of Apple REIT Arbitration Cases Filed Throughout the Unites States

Financial Industry Regulatory Authority Inc. (FINRA) arbitrator Alvin Green is ordering David Lerner Associates Inc. to pay claimants Florence Hechtel and Joseph Graziose $24,450 for the Apple REITs that they bought from the firm. They will get the money after returning the Apple REIT 9 shares to the company. The Apple REIT is the 14th largest non-traded real estate investment trust in the US. David Lerner & Associates also will have to reimburse them their $425 FINRA claim filing fee.

Apr 9, 2025

Pacific Cornerstone Capital Reports FINRA Arbitrations and Fines

In its SEC filing, Pacific Cornerstone said that it didn’t know what the future held regarding the FINRA matters. “Outside counsel for the company has advised that at this stage of the proceedings, they could not offer an opinion to probable outcome of the matters,” the company filing said. “Accordingly, no provision for loss has been recorded in the accompanying financial statements for 2011.”

Apr 9, 2025

First Apple REIT Arbitration Award Against David Lerner of Many in Florida and Nationwide

It is being reported that the first of potentially hundreds of arbitration cases relating to the sale of Apple REITS by David Lerner Associates Inc. has been decided in favor of claimants Joseph Graziose and Florence Hechtel.

Apr 9, 2025

Investment Wholesalers Play Big Role in Providing Misleading Disclosures to Investors in Florida and Nationwide

According to FINRA Rule 5122, a broker-dealer acts as a wholesaler if it is subject to an agreement to “sell through its affiliate broker-dealers less than 20% of the securities in [a private] offering.” In other words, the wholesaler sells less than 20% of the offering directly to retail investors, and works to sell the rest through selling agreements with third-party broker dealers. The wholesaler is typically a “captive” broker-dealer – i.e., a captive of the issuer in that its only products are the securities created by the issuer of the private placement. The Financial Industry Regulatory Authority (FINRA) is showing stepped-up interest in the role of broker-dealers and individuals that act as wholesalers in the sale of private (Reg D) offerings that clients and often brokers do not fully understand.

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