A recently filed FINRA customer complaint alleges that a former LPL Financial and Ameriprise Financial Services broker recommended unsuitable investments in a number of business development companies (BDCs) and real estate investment trusts (REITs), as well as other high-commission illiquid investment recommendations. The allegations focus on the broker’s time with LPL Financial from 2006 to 2015 and with Ameriprise Financial Services from 2015 to 2016. Claimants’ statement of claim, which was filed on or around September 9, 2020, seeks damages of $3.9 million.
Iorio Altamirano LLP is interested in speaking with any customers who may have suffered losses in their business development companies (BDCs) and real estate investment trusts (REITs) investments. If you have lost money with LPL Financial or Ameriprise Financial Services, contact New York securities arbitration lawyers Iorio Altamirano LLP for a free and confidential evaluation of your account.
Business Development Companies (BDCs)
Business development companies (BDCs) are organized to invest in two types of businesses: 1) small- and medium-sized companies in their initial development stages and 2) distressed companies looking to balance their finances. BDCs are similar to closed-end investment funds in that their shares are registered with the U.S. Securities and Exchange Commission (SEC). Registration provides some investor protections such as disclosure about the BDC’s investments and certain restrictions on the use of leverage. BDCs may be publicly-traded, non-traded, or structured as private BDCs.
Typically, a BDC must invest at least 70% of its assets in U.S. non-financial sector operating companies that are not listed (i.e., private companies) or public companies with a market cap of less than $250 million.
Though BDCs may be attractive to investors due to their high dividend yields, they are often considered high-risk investments with high sales commissions and unfavorable fee structures. In particular, FINRA has previously cautioned investors about the risks of non-traded or unlisted BDCs, which may be illiquid and offer investors limited opportunities to exit (i.e., periodic share repurchases at high discounts). They are considered high-risk, speculative investments for elderly customers.
Real Estate Investment Trusts (REITs)
A real estate investment trust (REIT) is an investment vehicle that allows investors to invest in income-producing real estate. REITs may own a wide range of real estate assets such as apartments, offices, commercial buildings, warehouses, etc. REITs let investors pool their money with other investors to invest in real estate without owning real estate assets individually. Instead, an investor owns shares in a REIT, and in doing so, they add the individual real estate assets owned by the REIT to the investor’s portfolio. Among other things, REITs are attractive to income-seeking investors for their regular dividend payments and higher-than-average yields. REITs may also provide an investor with diversification in their portfolio. But even with these apparent benefits, investors should understand the inherent risks of REITs and how to manage them. To read more about REITs, click here.
If you invested in business development companies (BDCs) and real estate investment trusts (REITs) and have lost money with LPL Financial or Ameriprise Financial Services, contact New York securities arbitration lawyers August Iorio and Jorge Altamirano of Iorio Altamirano LLP at august@ia-law.com, jorge@ia-law.com or toll-free at (855) 430-4010 for a free and confidential evaluation of your account.
Iorio Altamirano LLP is a securities arbitration law firm based in New York, NY. We pursue FINRA arbitration claims nationwide on behalf of investors to recover financial losses arising out of wrongful conduct by financial advisors and brokerage firms.