First Allied Ordered to Pay $2.6 Million Award Following Recommendations of Risky Non-Traded REITs
First Allied investors should review their portfolios to check if they recently lost money on risky, non-traded REITs. In March of 2022, FINRA ordered First Allied to pay a $2.66 million award to their investors following allegations that the broker-dealer had failed to supervise and allowed its representatives to recommend 12 unsuitably risky investments, including non-traded Real Estate Investment Trusts (REITs) and annuities. The $2.6 million award includes $1.9 million in compensatory damages, $40,000 in costs, and $660,500 in attorneys’ fees.
First Allied is an affiliated broker-dealer of Cetera Investment Advisers. Investors who work with Cetera Investment Advisers may have their securities transactions executed through First Allied.
Which FINRA Rules Did First Allied Allegedly Violate?
Investors alleged that First Allied had engaged in the following misconduct: Misrepresentation, omissions of a material fact, and failure to supervise.
- FINRA Rule 2020 prohibits brokers from making misrepresentations or employing any deceptive device during the sale of a security. It also prohibits the omission of any material facts that may affect the investor’s decision to purchase a security. Material facts include early withdrawal fees and tax burdens.
- FINRA Rule 3110 requires firms to maintain supervisory systems that will flag any signs of stockbroker misconduct—including the recommendation of unsuitably risky REITs and annuities.
- FINRA Rule 2111 requires stockbrokers to consider their investors’ age before recommending securities, as well as their tax status, financial situation, and employment. First Allied’s investors were retired, which means they most likely did not have high risk tolerances. REITs are illiquid, which makes them suitable only for investors who intend to hold them for a long period of time. REITs are therefore unsuitable for many elderly investors.
What are Non-Traded REITs?
Non-traded REITS do not trade on a public exchange, which makes it difficult for investors to evaluate their value. These investments are meant to be held for a long period, and often charge high fees for early withdrawals.
Stock brokers can earn large commissions for their sales of non-traded REITs, which may have motivated certain First Allied brokers to recommend these securities to their retired investors.
Investor Losses: REITs and Annuities
The Award names the following high-risk investments that allegedly lost investor funds. If you have invested in any of these funds and believe they may have been unsuitably risky, contact one of our REIT lawyers today.
- Ridgewood Energy
- Griffin Capital Essential
- Griffin-American Healthcare REIT III
- American Realty Capital Healthcare Trust II (ARC Global)
- Hospitality Investors Trust Inc. (ARC Hospitality Trust)
- Northstar Healthcare Income, Inc.
- Cole Capital
- UIT Advisors Bond Fund
- Metlife Annuity
- Midland Annuity
- Jackson Life Annuity
- AXA Annuity
ARC and First Allied
American Capital Realty (ARC) was the parent company of First Allied during the relevant time period, which may have created a conflict of interest for the stock brokers. Brokerage firms are required to tell investors about any potential conflicts of interest.
Kurta Law REIT Lawyers Can Recover Lost Funds
Our REIT lawyers have extensive experience recovering funds on behalf of investors who lost money following investments in non-traded REITs and unsuitable annuities. If you believe you lost money following an investment in an unsuitable investment product, reach out for a free case evaluation today. Call (877) 600-0098 or email firstname.lastname@example.org.