Seeking Alpha

Robert W Pearce's  Instablog

Robert W Pearce
Send Message
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
  • NOW THAT KBS REAL ESTATE INVESTMENT TRUST INVESTORS LOST OVER 50%: WHAT SHOULD THEY DO?

    It is now estimated by KBS Real Estate Trust Inc. (KBS REIT I) that investors' interests are worth $5.16. The new valuation represents a 29% drop from the last change to the valuation in late 2009 and a nearly 50% drop since shares of KBS REIT I were initially offered at $10.00. Many investors in the non-traded KBS I and II REITs have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. Additionally, KBS REIT investors were told that they would no longer be receiving any distributions. Our answer is: file a FINRA arbitration. Many claims are being filed by KBS REIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in KBS REIT and other REIT investments to recover their REIT losses.

    At first blush, one may think that the best claim is against the KBS REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the KBS 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 KBS REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that the KBS 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 KBS REITs 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. 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 KBS 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.

    Jan 11 11:13 AM | Link | Comment!
  • INVESTORS NATIONWIDE BEWARE - DON'T FALL FOR EARLY RETIREMENT INVESTMENT SCHEMES THAT PROMISE TOO MUCH!

    The thought of retiring early is an attractive notion. Especially when faced with a pitch that promises that one can cash in company retirement savings in his or her 50s, reinvest the money, and live comfortably off the proceeds. Many do not have the ability to say no to this alluring proposal, but they should. This is because there have been instances in which employees who had built up sizeable retirement savings have been misled and financially harmed by flawed, and even fraudulent, early retirement schemes.

    The scheme is hatched with an invitation to employees of a major corporation to attend a free seminar where a broker pitches a strategy that recommends one or more of the following actions: 1) retiring earlier than one might otherwise have done; 2) opt out of the company's retirement plan, which requires the employee to take a lump-sum payment for the cash value of his or her pension; 3) open a traditional Individual Retirement Account at the broker's firm; and 4) invest in variable annuities, Class B and C mutual fund shares, and exchange traded fund shares, which were substantially more risky than the fixed benefit pension given up. The suggested investments are represented as being able to generate returns as high as 18 percent, but little mention is made about the risks associated with such aggressive growth. The pitch also fails to mention the fees and expenses associated with the transactions. Furthermore, the strategy recommends annual withdrawals starting between 7.5 percent and 9 percent of the customer's initial investment, with increases at five year-intervals. While materials given to customers portrayed these rates as being sustainable for 30 years, they assume returns of 11 to 14 percent. These rates are simply unrealistic and not achievable without taking a substantial amount of risk.

    Since slick early retirement promoters can be quite persuasive, investors cannot be urged enough to think before they act. Taking early retirement presents risks and only makes sense if one has saved enough to begin with, made intelligent investment decisions during retirement years, and can withdraw money at a rate that does not deplete savings too early. Though there is no perfect formula on what the withdrawal rate should be, the uncertainty of return, market fluctuations, and increased life expectancy argue for being conservative with withdrawals, especially during the first years of retirement.

    Investors feeling lured in by promises of easy money during retirement should consider the following tips before withdrawing funds and committing to a broker:

    -Be skeptical of free lunch training sessions and other seminars that promote early retirement strategies, even if those events take place at the workplace.

    -Be wary of early retirement pitches that promote exceptions to the 10 percent tax penalty.

    -Think hard before trading the relative certainty of company pension, which may offer steady and predictable income for life for uncertain and fluctuating investments such as variable annuities and mutual funds.

    -Leaving 401(k) assets in the company's plan is probably the safest and least costly option. Numerous online resources about 401(k) investing can be found online and can help investors make good decisions.

    -Before cashing in a 401(k), it is important to do some math. Even if one can avoid the 10 percent penalty, not all the money withdrawn from the 401(k) can be reinvested outside of an IRA or other retirement account. Ordinary income taxes on withdrawals must be paid. So it is important to consult with a tax professional about any potential tax on the amount withdrawn before you reinvest in the early retirement program.

    -Consulting with an attorney is important if one owes child support or alimony. Cashing out of a retirement plan may mean that creditors can collect against any payments received.

    -If the strategy involves mutual fund investing, Class A mutual funds may be the best option if the investment amount is large enough to qualify of a discount on front end sales loads.

    -If the strategy involves variable annuities, be aware that most variable annuities have sales charges, a variety of fees, administrative costs, and investment advisory fees.

    -Verify whether the person offering early retirement investments is registered with FINRA by using FINRA BrokerCheck. If the person is registered, it is important to check for any disciplinary history.

    -Always seek a second opinion before committing to an early retirement program. Set up an appointment with a financial professional before considering someone who is looking for clients.

    Have you suffered losses resulting from an early retirement investment program that failed to deliver what was promised? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

    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.

    Jan 09 11:54 AM | Link | Comment!
  • BROKERS NATIONWIDE RESTART PUSH FOR INVESTORS TO BUY REVERSE CONVERTIBLES

    Investors are once again being pushed into structured products such as reverse convertibles by brokers who tout sturdy profits and very little downside risk. However, representatives are unable to account for why products like reverse convertibles have been unable to deliver stellar returns without posing a significant risk to investors' capital. Reason being is that more than most brokers do not understand how reverse convertibles work and are only selling them because of the hefty commission.

    Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.

    One example of an investor who lost money after buying Wells Fargo reverse convertibles is Dominic Annino. The 78-year-old invested $300,000.00 and lost money after the underlying stocks fell. Mr. Aninno filed an arbitration complaint with FINRA and alleged that the broker never fully explained the reverse convertibles to him.

    Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.

    Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

    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.

    Jan 09 11:42 AM | Link | Comment!
Full index of posts »
Latest Followers
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.