Robert Rex's  Instablog

Nontraded REITs, unlike those that trade on an exchange have no conventional market where investors can redeem them for cash. These non exchange traded REITs ,which were sold primarily by independent broker-dealers, were sold to investors at $10 per share with the promise of dependable and steady distributions of income, assurances that the value would be maintained or would increase, and no warnings related to the dangers of the illiquidity issue.

On December 12, 2012, William Galvin, the head securities regulator for Massachusetts charged LPL Financial, LLC of San Diego with a failure to supervise brokers who sold non-exchange traded real estate investment trusts (REITs) in violation of state limitations and company rules. Massachusetts also charged LPL with dishonest and unethical business practices. For more on that, follow this link.

Now many retirees having purchased these investments for the income they were to produce find themselves in a dilemma , since income has stopped and the investor, who needs income for daily living & healthcare expenses may be learning for the first time that the investments are not easily converted to cash.

According to the recent financial press, eight of the largest nontraded REITs have lost over $11 billion (37%) of their equity value.

The largest nontraded REIT, Inland American Real Estate Trust recently decreased its estimated value to $6.93. Behringer Harvard REIT I dropped its estimated value to $4.01 and Hines REIT announced an estimated value of $7.61. KBS REIT 1 increased its estimated value by a whopping 2 cents to $5.18.

ESTIMATED VALUE DOES NOT EQUAL FAIR MARKET VALUE

You can't buy groceries or pay your health care provider with "estimated value currency".

There is no such thing.

You will have to use U.S. Dollars.

This term estimated value stems from a regulatory requirement that companies come up with such a calculation periodically. This is so investors supposedly will have an idea of what the investment, which no longer makes distributions, is supposedly worth. The problem is that this estimated value is a far cry from fair market value ( ie; the amount of dollars you can get this week if you need to sell) for many of these nontraded REITs.

As a very recent example, this week we resolved with a brokerage firm for an elderly retiree involving a block of KBS REIT I. In preparation for the settlement conference, we spoke with a number of secondary market makers (the only market there is for these nontraded REITs) seeking a fair market value for KBS REIT I in order to evaluate any settlement opportunities. The best offer we received for a 10,000 share block was $2.50, which is less than half of the company's published estimated value of $5.18 .

REITs own real estate.

Whether the US real estate market will ever return to its former glory days remains to be seen. For retirees needing $$ now, what might happen in five years is of little consequence.

If you have losses in nontraded REITs that you were convinced to buy based upon misrepresentations, you may be able to recover all or a part of those losses through FINRA arbitration. Call us for a no charge consultation.

Nationwide representation.

Rex Securities Law

561 391 1900

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

FINRA Announces January 2013 Disciplinary Actions

by Robert H. Rex

The Financial Industry Regulatory Authority (FINRA) issues a report on disciplinary and other actions involving registered brokers, investment advisers and brokerage firms every month.

Here are significant Florida related actions for January 2013. Follow this link to the FINRA website for all of the January 2013 disciplinary actions as well as prior periods.

B & T Securities, Inc. - Boca Raton, FL and Brent Daryl Obergfell Registered Principal, Boca Raton, FL submitted
a Letter of Acceptance, Waiver and Consent in which the firm was censured, fined $20,000, of which $10,000 was jointly and severally with Obergfell, and required to discontinue any use of "B&T Asset Management," and submit for review to FINRA's Department of Advertising Regulation any websites made available to the public or any customer. Obergfell was suspended from association with any FINRA® member in any principal capacity for five business
days.

The firm and Obergfell consented to the described sanctions and to the entry of findings that the firm posted a website that made numerous misleading and unsubstantiated claims
or characterizations, and did not comply with Securities Investor Protection Corporation (SIPC) rules. The findings stated that when trading losses started to mount and the trading strategy the firm employed started changing in
response to changed markets, other statements posted to the website became misleading. The firm's website failed to provide a basis for the trading model and "Investment Style and Practice" descriptions. The logo on the website's
first page and elsewhere on the website characterized the firm as an asset management firm and claimed it had a unique market focus without providing a basis for those characterizations. The findings also stated that the firm's
written supervisory procedures (WSPs) addressing communications with the public did not address continued (or periodic) review of advertising (whether through websites or otherwise) to ensure the material remained accurate. The
WSPs did not assign anyone responsible for writing, approving or updating the WSPs applicable to advertising (including websites), and failed to designate
anyone with responsibility for supervising the chief compliance officer (CCO).
The suspension was in effect from January 7, 2013, through January 11, 2013.

EFG Capital International - Miami, Florida was censured and fined $40,000. The firm consented to the described sanctions and to the entry of findings that it failed to report to TRACE S1 transactions in TRACE-eligible securities within 15 minutes of the execution time. The findings stated that the firm failed to report to TRACE P1 transactions in TRACE-eligible securities within T+1 of the execution time.
The findings also stated that the firm failed to report the correct market identifier to TRACE for some S1 and P1 transactions, and over-reported some S1 transactions in TRACEeligible securities. The findings also included that the firm failed to report to TRACE the correct contra-party's identifier for transactions in TRACE-eligible securities.

Tradewire Securities LLC -Miami, Florida- the firm was censured, fined $27,500 and required to revise its WSPs regarding TRACE reporting. The firm consented to the described sanctions and to the entry of findings that it failed, within 90 seconds after execution, to transmit to the FNTRF last sale reports of transactions in designated securities and incorrectly designated as ".SLD" to the FNTRF last sale reports of transactions in designated securities within 90 seconds of execution. The findings stated that the firm double-reported to TRACE transactions in TRACE-eligible securities and reported transactions in TRACE-eligible securities it was not required to report. The findings also stated that the firm failed to report to TRACE S1 transactions in TRACE-eligible securities within 15 minutes of the execution time, and failed to report to TRACE the correct
capacity in TRACE-eligible corporate securities transactions. The findings also included that the firm's supervisory system did not provide for supervision reasonably designed to
achieve compliance with applicable securities laws, regulations and FINRA rules concerning TRACE reporting.

(John Boyd Dexter -North Miami, Florida) was barred from association with any FINRA member in any capacity. Dexter
consented to the described sanction and to the entry of findings that he failed to appear for testimony as FINRA requested in connection with an investigation that FINRA had initiated concerning alleged suspicious activity at a member firm's branch, where Dexter was employed as branch office manager. The findings stated that in a telephone conversation with FINRA, Dexter stated that he would not provide testimony or cooperate with the investigation because he was no longer employed in the securities industry.

According to FINRA records, Boyd last worked for Murphy & Durieu brokerage firm.

Alison Marie Janke - Port Richey, Florida was fined $11,600, which includes the disgorgement of financial benefit received of $6,600, and suspended from association with any FINRA member in any capacity for three months. Janke consented to the described sanctions and to the entry of findings that she participated in a private securities transaction without providing prior written notice to her member firm. Janke referred a customer who was seeking alternative investments to a registered representative at a different firm, where the customer invested $200,000 in a real estate investment trust (REIT) through the other
registered representative. Janke not only referred the customer to another representative, but also attended the meeting with the customer and the other representative, and
assisted with the completion of the purchase transaction. The findings stated that a limited liability company Janke owned received a $6,600 payment in connection with the sale of
the REIT.

According to FINRA records Janke works for Summit Brokerage Services. Prior to that she was employed by Wells Fargo Advisors.

The suspension is in effect from December 3, 2012, through March 2, 2013.

William Earl Manley -Sarasota, Florida was barred from
association with any FINRA member in any capacity. Manley consented to the described sanction and to the entry of findings that he failed to respond to a FINRA request for information regarding his arrest, felony charge and termination from his member firm. The findings stated that Manley advised FINRA he would not respond to a request for information.

According to FINRA records, Manley is not currently registered and he last worked for PRUCO Securities in Sarasota, FL.

James DeFranco Marshall - Longwood, Florida was fined $5,000 and suspended from association with any FINRA member in any capacity for 30 days. Marshall consented to the described sanctions and to the entry of findings that he became involved with an entity engaged in non-securities, non-investment related business. Marshall was identified in public documents as one of the entity's three managers/members. Marshall also created and maintained the company's website.

Marshall received $4,835.47 in compensation for his outside business activity. The findings stated that Marshall failed to provide his member firm with prior written notice of this
outside business activity.

The suspension was in effect from December 3, 2012, through January 1, 2013.

Charles Tuttle Mason aka Chip Mason St. Pete
Beach, Florida and Darren Duane Gibson Oceanside, California were each fined $5,000 and suspended from association with any FINRA member in any capacity for
three months. Mason and Gibson consented to the described sanctions and to the entry of findings that while employed as wholesalers at their member firm, they were responsible for promoting a non-registered entity's offerings to retail broker-dealers, through sales presentations and providing marketing materials to registered representatives. The findings stated that Gibson, through his wholesaling efforts related to the entity's offerings, secured selling agreements from retail broker-dealers, who in turn raised more than $300 million from investors and earned $2,930,000. The findings also stated that Mason, through his wholesaling efforts related to the entity's offerings, secured selling agreements from broker-dealers, who in turn raised more than $132 million
from investors and earned approximately $1,500,000. The findings also included that Mason and Gibson assisted the retail broker-dealers with product training by providing
sales and marketing materials designed to encourage individual investors to purchase the offerings. Mason and Gibson read most of the third-party due diligence reports regarding the offerings. Several of the reports raised concerns about the accounting of inter-offering transactions and the ability of the offerings to generate sufficient revenue from oil and gas investments. Mason and Gibson, though aware of the concerns raised in the due diligence reports, continued to market the offerings without having adequately investigated the subject concerns and determining for themselves whether the offerings were appropriate to be recommended to investors.

Mason's suspension is in effect from November 19, 2012, through February 18, 2013. Gibson's suspension is in effect from November 19, 2012, through February 18, 2013.

According to FINRA records Mason is not currently registered and last worked Newport Coast Securities.

Steven Jay Oshinsky - Boca Raton, Florida was suspended from association with any FINRA member in any capacity for one year. Without admitting or denying the allegations,
Oshinsky consented to the described sanction and to the entry of findings that he failed to timely respond to FINRA requests for documents and information to investigate his
potential failure to disclose tax liens and outside business activities on his Form U4. The findings stated that Oshinsky's failure to timely respond impeded FINRA's investigation.
The suspension is in effect from December 17, 2012, through December 16, 2013. According to FINRA records he is not registered and last worked for Catalyst Financial.

Clayton George Roach -Jacksonville, Florida was fined $5,000 and suspended from association with any FINRA member in any capacity for six months.

Roach consented to the described sanctions and to the entry of findings that he participated in the sale of private placements by promoting an offshore investment club,
referring investors, acting as an officer and registered agent for the offshore investment clubs' Florida-based affiliate, facilitating other people's investment in the offshore
investment club and receiving no less than $64,000 in compensation from the offshore investment club. Roach did not receive any direct compensation based on the referrals, but he received a monthly stipend for other activities on the offshore investment club's behalf.

The findings stated that Roach participated in private placement securities transactions without providing the requisite notice to his firm. The suspension is in effect from December 3, 2012, through June 2, 2013.

According to FINRA records he last worked for Equity Sevices Inc. and is not currently registered.

Michael Lee Trier (CRD #1628954, Registered Representative, Oviedo, Florida was fined $2,500 and suspended from association with any FINRA member in any capacity for 30 business days. Trier engaged in private securities transactions without providing his member firm with the required written notice describing the proposed sales.
The suspension was in effect from November 19, 2012, through January 3, 2013.

Ronald E. Walblay Delray Beach, Florida was barred
from association with any FINRA member in any capacity. The sanction was based on findings that Walblay failed to appear in response to FINRA requests for on-the-record
testimony.
The decision has been appealed to the NAC and the sanction is not in effect pending review.
According to FINRA records Walblay last worked for Energy Securities and is not currently registered.

Kenneth Andrew Mauchin -Sanford, Florida was
named a respondent in a FINRA complaint alleging that he misappropriated $23,750 from elderly customers' accounts by converting their funds to cashier's checks and depositing
those checks into a bank account of an entity he controlled. The complaint alleges that Mauchin did so without the customers' knowledge or authorization. The complaint also
alleges that Mauchin prepared a customer's application for a variable annuity and falsely listed his bank branch office address as the customer's mailing address, which he knew to
be false. In addition, a customer applied for a premiere select IRA brokerage account with Mauchin's firm and, without the customer's knowledge or authorization, he falsely listed
his bank branch office address as the customer's mailing address, which he knew to be false. These applications became part of the firm's books and records, causing his firm's books and records to be false. The complaint further alleges that Mauchin failed to appear for FINRA on-the-record testimony.
According to FINRA records he last worked for SunTrust Investment Services.

If you have suffered losses in your brokerage account due to negligent advice or fraud, you may be able to recover all or a part of those losses through FINRA arbitration. Most of our cases are done on a contingent fee basis, meaning you only pay fees if you recover.

Nationwide representation.
Free consultation.

Rex Securities Law
561 391 1900

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

In December 2012, an investor in the UBS Willow Fund, a private hedge fund formed in 2000, was named in a class action lawsuit filed in Manhattan. The case is Boudreau v UBS Willow Management LLC . Other UBS affiliates are also named in the case as well as several individuals involved in the management of the fund.

Earlier in the year, investors were notified that the Fund, which is down 80%, was being liquidated.

Investors who were sold this investment based on misrepresentations that it was safe and low risk may be able to recover a portion or all of those losses through FINRA arbitration against the brokerage firm who sold the investment. Brokers have a duty to make suitable recommendations to investors.

FINRA arbitration generally does not prohibit the investor from also participating in any recovery resulting from a class action like this one since the defendants in the class action are not the same as the ones typically named in a FINRA arbitration.

Rex Securities Law is investigating UBS Financial Services as well as other brokerage firms that sold Willow Fund to determine if their sales practices were deficient in connection with the sale of this investment.

If you have losses as a result of investing in Willow Fund, call us for a no charge consultation. We have been assisting investors with recovery of stock market losses for 25 years.

Nationwide Representation.
Free consultation.

Rex Securities Law

561 391 1900

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.