On July 23rd, KBS REIT investors' lead plaintiff George Stewart withdrew his class action suit against KBS REIT, alleging that KBS made misrepresentations about the REIT, including its investment objectives, the dividend payment policy and the value of the REIT's investments. No reason was given, but the Motion to Dismiss the Complaint pointed out the onerous pleading requirements of securities class actions. Perhaps Mr. Stewart will proceed to take his case to arbitration, the more traveled and less bumpy road to resolve investors' disputes. While the pending class action lawsuit against KBS has been withdrawn, investors in KBS can still file FINRA arbitration claims to attempt to recover their losses. In any event, KBS REIT investors will not benefit from his decision and need to take matters in their own hands!
Brokerage firms have a fiduciary duty to their clients to perform adequate due diligence on investments before recommending them to their clients. Based on what is now known about KBS REIT, it appears that the firms that sold the product will be unable to demonstrate that they performed adequate due diligence. Rather, it appears that the firms that sold KBS REIT were more interested in the high commissions selling the investment created (and not whether the investment was appropriate for investors).
KBS REIT I raised $1.7 billion in equity in its initial offering, according to an investor presentation the company filed with the Securities and Exchange Commission in March. It has $3.4 billion in property assets, and holds loans and other debt of $2.3 billion. Investors in KBS REIT I were notified in March that the REIT's value would be cut to $5.16 per share, from $7.32, a drop of 29%. The REIT's offering price was $10 per share. It also said it was stopping distributions to investors. Investors have good reason to be upset with KBS REIT, and more reason to complain about the brokers who recommended the investment.
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.