Recently, securities regulators have focused considerable time and effort on brokers who recommend real estate investments to their customers. These investments, which often take the form of a Real Estate Investment Trust (REIT) or a Tenants-in-Common (TIC), are often highly speculative and illiquid investments. Brokers sometimes disregard their legal duties to their customers by recommending REITs or TICs, and usually do so because of the significant fee they receive from selling these types of products, which can be as much as 10% of the amount invested in the REIT or TIC.

For example, a broker might encourage clients to invest in real estate promissory notes. These types of investments are frequently tied to broker involved Ponzi schemes and misappropriation. Even if the promissory notes were not a scheme to steal the money, they are not proper investments for a registered stockbroker to sell to a customer, resulting in broker fraud and lost investment for the clients who decided to go with these recommendations.

REITS are often inappropriate for most investors. Since non-traded REITS do not sell shares on the stock market, they lack the transparency regarding share values and market prices of the open market. Conflicts of interests regarding brokerage firm benefits may also come into play regarding this type of trust.

 

Recent Investigations:

Hilliard Lyons Investment Fraud with Breitburn Energy Involving Broker Michael B. Barnett

William August Glaser Broker Information

Robert Wamhoff: Eight Customer Complaints