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FINRA Arbitration Panel: Brokerage Firm Liable for Losses Sustained in Unsuitable REITs

Recently, the Financial Industry Regulatory Authority (FINRA) Office of Dispute Resolution announced that a Florida investor was awarded compensation in an arbitration claim that was filed against Ameriprise Financial Services and its representative Carroll Thomas Clark (CRD#: 734524).

According to the agency, the investor filed a complaint alleged unsuitable investment losses. Specifically, these losses were sustained after purchases of non-traded real estate investment trusts (REITs). To get access to the full details related to this decision please refer to Case Number: 17-00254.

What is a Non-Traded Real Estate Investment Trust? 

A real estate investment trust (REIT) is an entity that holds a portfolio of income producing real estate properties. An REIT could contain anything from office buildings and other commercial units to apartment buildings or healthcare facilities. Indeed, REITs contain a wide range of different underlying investments and structures. By putting their money into an REIT, investors are able to own a share of those types of properties. While they are a reasonable choice for some investors, REITS are notoriously risky. In fact, there are a number of well-known downsides to investing in these types of trusts. Notably, non-traded real estate investment trusts — meaning REITs that are not listed on any market exchange — are an even riskier version of this financial product. 

Non-Traded REITs are Not Suitable for Most Investors  

Brokers and brokerage firms must have a reasonable basis to believe that securities or an investment strategy is actually appropriate for their customer. Among other things, brokers should determine a risk profile of their investors in order to better understand a client’s objectives and needs. Under FINRA Rule 2111 (the suitability rule), brokers can be held legally liable for losses an investor sustains in unsuitable investments. For a number of different reasons, non-traded real estate investment trusts are unsuitable for the vast majority of retail investors. Specifically, REITs are:

  • Not listed on any stock exchanges, making them very difficult to trade;
  • Complicated and opaque investments;
  • Typically associated with high commissions and fees; and
  • Do not offer guaranteed distributions.

Taken together, the conclusion is clear: non-traded REITs are risky investments. Simply put, they are only suitable for sophisticated investors who have a relatively high tolerance for risk. If you lost money in an unsuitable real estate investment trust, you may have a viable claim against your broker or broker-dealer. You should not hesitate to seek professional legal support. A lawyer can help you understand your rights and assess your legal options.

Get Help From a Miami, FL Unsuitable Investment Attorney

At Carlson & Associates, P.A., our Florida securities fraud lawyers represent investors in all types of unsuitable investment claims. If you or your loved one lost money investing in unsuitable real estate investment trusts (REITs) or any other similar type of financial product, we are here to help. To set up a strictly confidential review of your FINRA arbitration claim, please call our Miami law office today at 305-372-9700.


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