Rex Securities Law filed a FINRA arbitration claim on behalf of an elderly widow who was sold a number of unsuitable and risky limited partnerships and non exchange traded real estate investment trusts (REITs).
One of the limited partnerships is Reef Oil & Gas Income and Development Fund III LP.
According to the offering documents, this investment ,which went to the market in late 2007, was to be sold only to "accredited investors". The offering was closed in 2008 with nearly $90 million raised. Units were $100,000 each with a minimum purchase of 1/4 unit ($25,000) .
The SEC defines an accredited investor to include a person with a net worth , not counting the value of the primary residence, of $1 million or more or a person within income exceeding $200,000 in each of the two most recent years or joint income of over $300,000 a year. In addition, there must be a reasonable expectation of the same income in the current year.
In order to make sales, brokers are tempted to stretch the rules and as in this case, exaggerate income, net worth or both in order to get the sale approved. Limited partnerships and other alternative investments tend to have much higher commissions than conventional investments, hence the temptation.
Reef Oil and Gas sold a number of other investments in the oil patch, including these:
- Reef 2007-2009 Drilling Program
- Reef 2010 Drilling Fund
- Reef 2012-2013 Drilling Fund
- Reef 2011 Private Drilling Fund
- Reef 2012-A Private Drilling Fund
- Reef Global Energy I through IX
- Reef Income Funds, various years
Brokers have a duty to make suitable recommendations. If you were sold an investment and were not apprised of its risks or did not fully understand it, you may be able to recover damages. Likewise if the investment was only qualified for sale to accredited investors and you don't meet the financial criteria, you may have a claim for damages.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.