Mississippi Investment Loss Recovery Lawyers
Ole Miss, the birthplace of blues music, and the southern comforts of home, Mississippi seniors love their home state for its retirement communities and the state’s tax-friendly benefits. More than ever, Mississippi investors and retirees are faced with many choices of where to invest their retirement funds. Senior investors disproportionally rely on financial advisors for investment advice compared to today’s younger generation, who have a greater tendency to manage investments on their own with a few taps on their mobile phone. Both have risks, however, those managing their own accounts are less likely to encounter privately traded securities, which are alternative investment products typically offered through the recommendations of one’s financial adviser. These alternative products come in many forms, such as non-traded Real Estate Investment Trusts (REITs) or non-traded Business Development Companies (BDCs). They usually have additional fees and risk features that are not readily evident to the typical retail investor, and, therefore, can mislead seniors and prospective retirees to believe that their future retirement funds are safe, when actually they are not. These securities are not suitable for everyone, and they typically should make up only a small portion of one’s retirement portfolio.
Retirees who have lost money due to being over concentrated in these alternative products from unsuitable recommendations by their financial adviser, and where the associated fees and risks went undisclosed or not properly explained, may have some legal recourse to recover their losses. Malecki Law is a national investment loss recovery law firm that can provide legal representation to Mississippi investors, as the firm has recovered tens of millions of dollars for retirees and other senior investors who have lost money due to fraudulent misrepresentations and omissions, negligence, and financial firm failures to properly supervise their financial representatives when recommending alternative financial products.
In 2018, the Securities Division of the Mississippi Secretary of State’s issued an Administrative Consent Order settlement with the brokerage firm LPL Financial LLC, sanctioning the firm for misrepresenting to investors that certain alternative products were ordinary, publicly-traded equities. The regulator stated that these misrepresentations had occurred since at least 2012, where “LPL was aware” that certain non-traded real estate investment trusts and non-traded business development companies were misclassified as equities on customer account statements. Monthly account statements are considered by regulators to be “communications with the public” under state and federal securities laws, and therefore, misclassifying alternative products as regular equities had the potential to mislead investors that their funds were safe.
According to a 2015 Investor Bulletin by the U.S. Securities and Exchange Commission (SEC), alternative products like non-traded REITs have risks different than investments that are publicly traded, and investors should consider these risks before investing, including:
- Lack of liquidity: “Non-traded REITs are illiquid investments, which mean that they cannot be sold readily in the market. Instead, investors generally must wait until the non-traded REIT lists its shares on an exchange or liquidates its assets to achieve liquidity. These liquidity events, however, might not occur until more than 10 years after your investment.”
Malecki Law’s experienced investment loss recovery lawyers recognize that retirees and seniors do not typically have a time horizon of ten years for their investments to mature. Younger investors may be able to afford the wait, but not retirees who are not working and, therefore, need liquidity and to be able to access their money for daily living and the increased medical expenses typical with aging.
Moreover, the SEC warns of additional risks that a firm and its financial advisors should fully disclose, especially concerning the high costs of these alternative products:
- High fees: “Non-traded REITs typically charge high upfront fees to compensate a firm or individual selling the investment and to lower their offering and organizational costs. These fees can represent up to 15 percent of the offering price, which lowers the value and return of your investment and leaves less money for the REIT to invest. In addition to the high upfront fees, non-traded REITs may have significant transaction costs, such as property acquisition fees and asset management fees.”
Malecki Law’s investment loss recovery attorneys understand that the above is material information that should be relevant to most investors, not just seniors, since allocating 15% to just fees alone means that an investment would need to return a gain of 15% to break even, and 16% to make a profit of even 1%. That is a highly speculative risk for any investor to take on.
There are other risks associated with non-traded REITs (whose risks are common to non-traded BDCs and numerous other non-traded products) concerning their lack of transparency. For background, a real estate investment trust, or REIT, is a legal entity owning income-producing real estate, such as office buildings, shopping malls, hotels, and apartments. A publicly traded REIT lists its shares on a securities exchange and the market establishes a fair value for the shares. In contrast, a non-traded REIT is opaque because it does not list its shares on any exchange and the true value of its shares may be obscured or misstated. Dividends are not guaranteed because the distributions may be funded entirely or in part by new investor cash or borrowed funds – leveraged money that can place the REIT at greater risk of default and devaluation, including loss of the entire principal investment. Because non-traded REIT shares do not trade on national securities exchanges, they cannot be easily priced or sold. Unsophisticated investors have often been startled to discover that they cannot exit their investments when they need to and that few willing buyers will be available to purchase their shares.
If you are a Mississippi retiree or investor who has suffered investment losses in your retirement account and believe you have been sold non-traded REITs or other alternative, non-traded investment products without proper disclosures of the risks, then you should contact an investment loss recovery law firm like Malecki Law for a free initial consultation. Many of our customers choose a contingency arrangement instead of being billed hourly, meaning we do not get paid unless we make a financial recovery for you first.