FINRA reissued its Investor Alert on non-traded REITs as a result of the action filed by FINRA against David Lerner & Associates for failing to investigate the suitability of the investment and for marketing the REITs on its website using misleading returns.
According to the release, FINRA reissued the Alert:
"because of concern that some investors may be the recipients of misleading information regarding certain public non-traded REITS. Some investors may also receive recommendations to purchase these products without adequate investigation by the firm or individual broker to determine whether these or similar investments are suitable."
In their release , FINRA points out some of the same pitfalls of non-traded REITs we have been warning investors about for the past year, including:
- shares do not trade on a national exchange
- the secondary market offers very limited liquidity and shares generally trade at a substantial discount
- front end fees can be as high as 15% of each dollar invested
- share prices can fluctuate, up or down
The share price of many non-traded REITs has dropped since the date of issue. In some cases the current value is less than half of the original purchase price. Given the state of the economy, and in particular, real estate, it is not likely that shares will recover to the original purchase price for many of these REITs.
Couple with this the fact that many REITs have dramatically reduced or eliminated distributions and their lack of liquidity, those who purchased to supplement fixed income have a real problem.
If you purchased a non-traded REIT based upon misrepresentations, you may be able to recover some or all of your losses. Contact us for further information.
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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.