Charles Chul Nam, formerly with Oakdale, Minnesota based Woodbury Financial Services, Inc. and Springfield, Massachusetts based MML Investors Services Inc., has been sanctioned by the Financial Industry Regulatory Authority (FINRA) after it found that Mr. Nam made fraudulent misrepresentations and omissions of material fact in connection with the offer or sale of a real estate investment trust (REIT) and used telephone lines and the Internet to perpetuate his fraud. FINRA's findings stated that while employed by each of the firms, Mr. Nam falsely represented that he was affiliated with and accepted investor funds on behalf of the REIT. Through his material misrepresentations and omissions of facts, Mr. Nam fraudulently obtained $792,750 from the investors, $352,750 of which has not been repaid. Mr. Nam, of Tarzana, California, was barred from association with any FINRA member in any capacity and required to pay $352,750 in restitution to investors.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for long periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Non-traded REITs are not listed or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Non-traded REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factors associated with them.
FINRA's findings further stated that Nam acted with "scienter," which supports a finding that his violations were willful. In addition, FINRA stated that Nam wrongfully converted investors' funds and used the funds for his own purposes. FINRA also included that Nam failed to respond to FINRA requests for information and to appear for testimony.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from broker misconduct. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages due to Mr. Nam's fraudulent activity can bring forth claims to recover losses against Woodbury Financial Services, Inc. and MML Investors Services Inc., which should have prevented Mr. Nam from committing the described illegal activity.
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. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.