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Robert W Pearce
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Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
My company:
The Law Offices of Robert Wayne Pearce, P.A.
My blog:
The Investor's Rights Law Blog
  • WHAT SHOULD DESERT CAPITAL REAL ESTATE INVESTMENT TRUST INVESTORS DO? 0 comments
    Dec 31, 2012 10:45 AM

    Many investors in the non-traded Desert Capital REIT have inquired about their ability to recover their losses after learning that: (1) Desert Capital REIT suspended its dividend and redemption programs in or about 2008; (2) Desert Capital REIT filed for Chapter 11 bankruptcy in the summer of 2011; and (3) Desert Capital REIT has been subpoenaed by the Securities and Exchange Commission reportedly due to fraudulent payments and transactions between Desert Capital and CM Capital (a related entity). Our answer is: file a FINRA arbitration. Many claims are being filed by Desert Capital REIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in the Desert Capital REIT and other REIT investments to recover their REIT losses.

    At first blush, one may think that the best claim is against the Desert Capital REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Desert Capital REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.

    The most common misrepresentation and misleading statement claims that the Desert Capital REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that the Desert Capital REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in the Desert Capital REIT and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Desert Capital REIT paid an extremely high commission to the brokerage firms that sold the investment (somewhere between 7-10% depending on whether the brokerage firm was entitled to an additional "due diligence" fee). This likely explains the financial advisors and broker-dealers' motivation in recommending and selling this investment. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are a Desert Capital REIT investor with the same complaints, we believe we can help you recover your REIT losses!

    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.

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