The Financial Industry Regulatory Authority (FINRA) is investigating and considering legal action against a "captive" broker-dealer of a real estate investment company for the second time in three years. (See InvestmentNews article by Bruce Kelly entitled "Non-traded REITs' B-D faces another probe").
Pacific Cornerstone Capital is the broker-dealer manager of two non-traded real estate investment trusts that have undergone steep declines in value. Terry Roussel is the firm's owner and Vincent Finnegan is its chief executive officer. The Law Office Robert Wayne Pearce, P.A. recently filed an arbitration claim against the firm and its principal for alleged misrepresentation and misleading statements in connection with one of its REIT deals.
Pacific Cornerstone Capital recently filed to deregister with the Commonwealth of Massachusetts and disclosed that it was "involved with an arbitration proceeding before FINRA and one FINRA investigation," according to the article. Yet there is no mention of another Florida arbitration filed by the Law Offices of Robert Wayne Pearce, P.A. on FINRA's BrokerCheck to date.
FINRA fined Pacific Cornerstone Capital $700,000 in 2009 for misstating material facts involved in the sale of private placements according to the firm's CRD profile on FINRA's BrokerCheck.
"Cornerstone is just in a world of hurt," Tony Chereso, chief executive of FactRight LLC, a consulting and due-diligence firm for alternative investments such as non-traded REITs, was quoted as saying, adding: "First, the regulatory culture at Cornerstone was not strong, and second, they were thinly capitalized. Third, they had layers of costs burdening programs you don't typically see on non-traded REITs."
With FINRA allowing broker-dealers who sell non-traded REITs to use up to 15% of investors' money to pay themselves, it is hard to understand what Mr. Chereso meant by "layers of costs burdening programs you don't typically see on non-traded REITs."
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 firstname.lastname@example.org for answers to any of your questions about this blog post and/or any related matter.