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Daniel Carlson is a lawyer in San Diego focused on securities litigation who specializes in recovering investment losses for his clients.
A reverse exchangeable security (also known as a “reverse convertible”) is a type of structured investment product. These are complex investments that involve features, terms, and risks that are very difficult for investors to understand.
Firms that offer reverse convertible investments have been put on notice by FINRA of the high risk in these products in order to ensure that the promotional materials and public communications employed regarding these products are both fair and balanced. It is important that these materials do not understate the reality of the risks associated with reverse convertible investments. Moreover, member firms must also remember to make sure that their registered financial representatives comprehend the terms, costs, and risks associated with reverse convertible investments. With this understanding, these representatives should perform adequate analyses on each customer’s suitability prior to a recommendation and explain thoroughly all risks and returns involved.
Prior to a recommendation involving either the purchase or sale of a given security, financial firms must form a reasonable basis upon which to determine that the products not only suitable for at least some investors, but also suitable for each specific customer to whom the adviser recommends that particular product. The suitability of a reverse convertible investment must be reviewed carefully. This requires firms to comprehend and explain the risks, terms, costs, and conditions of these structured products. Firms must grasp a reverse convertible’s terms and features in a comprehensive manner. These include the reverse convertible’s payout structure, the volatility of the reference asset, the product’s credit, market and other risks, call features, and the conditions under which the investor would or would not receive a full return of principal.
Given that each reverse convertible is unique, firms have to perform this suitability analysis for each reverse convertible investment that they recommend.
A firm’s consideration of product benefits to a specific customer (like the promise of a certain coupon rate, for example) must consider the risk to the investor. Investment firms and advisors are required to deal fairly with customers when recommending investments or accepting orders for new financial products. Firms must make every effort to communicate clearly to customers any pertinent information regarding these products.
If you think that you have been the victim of investment fraud, related to reverse convertible investments or another form of securities fraud, contact Daniel Carlson at the Carlson Law Firm today for a free consultation at 619-544-9300. Also, be sure to follow my firm on LinkedIn and Twitter.
Tags: breach of fiduciary duty, Broker Fraud, financial loss, investment loss, Negligent Misrepresentation
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Daniel Carlson is a securities litigation attorney in San Diego who specializes in recovering investment losses for his clients.
English: Seal of the Commonwealth of Massachusetts (Photo credit: Wikipedia)
In late December of last year, securities regulators for the Commonwealth of Massachusetts filed an administrative lawsuit accusing LPL Financial, LLC of violating securities laws in regards to their sale of non-traded REITs (Real Estate Investment Trusts). After an investigation of 587 transactions valued at $28 million dollars, agents found that LPL violated prospectus requirements in 569 of those transactions. The lawsuit demanded that LPL make full restitution to all Massachusetts investors who invested in the non-traded REITs.
On February 6th, 2013, the lawsuit settled when Massachusetts’ regulators ordered LPL Financial to pay up to $2 million dollars to investors and another $500,000 in fines. Massachusetts residents will be allowed to surrender their non-traded REIT’s back to LPL at the investors’ original purchase price, which was around $10 dollars a share.
REITs investments vary, many invest in commercial real estate such as strip malls and hotels. They are often promoted to investors with the sales pitch that the properties will increase in value. Of course, this may or may not happen. Many REITs are publicly traded, meaning that an investor can easily sell the interest if the investor needs to for any reason. A large problem for many investors with non-traded REIT’s, which do not trade on securities exchanges, is that they can be very difficult to sell and get out of. In addition, investors can continue being forced to contribute to the non-traded REIT for things like maintenance and repairs, depending on the language of the individual investment agreement. There are many non-traded REITs who stopped distributions long ago and left investors holding an interest that has little value as malls and hotels closed.
Not surprisingly, non-traded REIT’s generate higher fees and commissions for brokers. This can act as an incentive to unscrupulous agents to sell them to unsuspecting investors, especially seniors.
TIME IS OF THE ESSENCE
While the above action only applies to residents of Massachusetts, LPL sold the non-traded REITs nationwide. Residents of other states, including California, would be well advised to seek legal consultation on their non-traded REITs sold by LPL and other advisors. Since many of the LPL REITs were sold beginning in 2006, it is important to pursue your claim as soon as possible. .
If you think that you have been the victim of investment fraud in regards to non-traded REITs sold by LPL or other companies, contact Daniel Carlson at the Carlson Law Firm today for a free consultation at 619-544-9300.
Tags: breach of fiduciary duty, Broker Fraud, California, Investing, Investment Fraud, LPL, LPL Financial, Real estate investment trust, San Diego, Securities Fraud Attorney San Diego
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Mutual Funds 101
Mutual funds are sold by companies that pool money (capital) from many investors. This capital is then invested in bonds, stocks and/or other securities. Investors in the fund all have shares, and these shares represent a part of the fund’s holdings.
If you’re interested in making an investment, a mutual fund may or may not be the right choice for you. Like all investments, they come with many different levels of risk. They aren’t insured or guaranteed by financial institutions or government agencies, even those sold by banks. However, because mutual funds are often a mix of various bonds and/or stocks, the risk is some mutual funds is “spread out” or diversified. That said, some mutual funds are not diversified, and it is important to understand that a mutual fund investment can be very high risk, or very low risk, depending upon the holdings and the goals of the fund. Each fund must be looked at individually to determine if it is appropriate for the investor, in the same manner as any individual stock or other investment.
Mutual funds are managed by professional fund managers. These managers invest the money investors contribute into individual stocks, bonds and other securities. And because mutual funds buy and sell securities in large amounts at one time, they usually incur fewer fees, thus operating in a cost-efficient manner. However, it is very important to carefully examine prior to purchase all of the fees and costs associated with the fund you are purchasing as they can vary greatly and take a significant bite out of your return.
If you feel your financial advisor placed you in inappropriate mutual fund investments and/or failed to disclose the fees and costs associated with investment or that the underlying holdings of the fund were beyond your tolerance for risk, you may have a case. Call Carlson Law at 858-544-9300 for a free consultation.
Tags: bonds, Broker Fraud, capital, disclosure, diversification, Fiduciary Duty Breach, financial, financial loss, FINRA, Fraud Attorney, Investment, investment attorney, investment loss, Investor, investors, losses, mutual fund, mutual funds, Negligent Misrepresentation, San Diego, securities, Securities Fraud Attorney San Diego, securities lawsuit, Stock Loss, stocks, unsuitability, Unsuitable
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Making financial investments with money from a loan on your home is generally a poor, high risk activity. And it’s a particularly poor idea when the investment is a private placement that’s speculative and unable to be liquidated easily or traded publically. Brokerage houses that encourage clients to take out extra mortgages or home equity loans in order to buy risky investments in limited partnership and private placements are often held liable for their customers’ financial loss.
In 2009, the Ameritas Investment Corporation was fined $100,000 by the Financial Industry Regulatory Authority (FINRA) for not supervising one of its brokers whose deceptive financial recommendations to customers included home refinancing to purchase securities. The broker was fined $60,000 by FINRA, and her license was suspended for five years.
If your broker encouraged you to take out real estate loans in order to invest in any private securities, limited partnerships or other investments, you should seek the advice of a securities attorney. Contact Carlson Law for a free consultation.
Tags: Broker Fraud, Fiduciary Duty Breach, financial loss, Investment Fraud, investment loss, investment recovery, limited partnerships, Negligent Misrepresentation, private securities, San Diego, Securities Arbitration, Securities Attorney, Securities Fraud Attorney San Diego, securities lawsuit
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