Investors Seek Recovery After FINRA Fines and Suspends Former LPL Broker Donald Woods

Chicago-based Stoltmann Law Offices, P.C. is a securities investor protection law firm offering representation nationwide to investors seeking to recover investment losses.  Our team is monitoring and reviewing information in connection with former LPL  financial advisor Donald Stephen Woods. According to published reports, Mr. Woods, of Louisville, Kentucky and currently registered with Thurston Springer Financial, intentionally manipulated and changed documents at LPL to qualify non-traded REIT sales that would have otherwise not been approved. LPL has certain limitations on how much of an investor’s declared liquid net worth can be concentrated in alternative investments, like non-Traded REITs.  Typically, LPL limits this exposure to 25% of liquid net worth, but can be lower for elderly investors and those with more conservative investment objectives. Brokers like Woods get around this limitation by inflating the client’s net worth numbers adjusting them upwards by a few hundred thousand dollars can be the difference between compliance approving the transaction and the broker getting paid his massive commission, and not approving it, leaving the broker to find something else to sell the client.

Ultimately, the responsibility for this sort of amateur chicanery engaged in by Mr. Woods falls on his firm. Stoltmann Law Offices has represented hundreds of investors in cases just like this. Almost always, there is an obvious disconnect or contradiction between the net worth numbers on the alternative investment forms, and the client’s new account forms. Compliance has a responsibility to ensure that brokers like Mr. Woods are not artificially inflating client net-worth numbers on these forms in order to qualify them for the investment. Most of the time all it would take is a simple phone call from compliance to the client to determine the accuracy of these numbers and reveal that the broker either forged the documents altogether, or advised the client to ignore the net worth numbers included on the form, to trust their adviser, and not worry about it.

Non-Traded REITs have been selling at rates not seen since before the financial crisis in 2008. There is one reason for this – commissions.  Non-Traded REITs like those offered by Northstar, Cottonwood, Highlands REIT, KBS Growth & Income REIT, Resource Innovation Office REIT, and InvenTrust Properties Corp., pay brokers like Mr. Woods and their firms like LPL commission rates that are many times higher than if they just sold clients publicly-traded, liquid REITs.  The SEC, FINRA, and NASAA all warn about issues related to these non-traded REITs.  Scholarly articles decry them as being poor investments long term compared to their publicly-traded cousins. Some of the issues about these non-traded REITs include:

  1. Liquidity risk – once you invest, its very difficult if not impossible to get your money out;
  2. High Fees – Not just on the commission side, these non-traded REITs have enormous internal costs that reduce investor return;
  3. Your distribution is likely a return of principal – its not Return on Investment – It is Return OF Investment!
  4. Lack of share price transparency – you are depending on the REIT to accurately represent to you what it is worth, not the market!
  5. Conflicts of Interest – Non-Traded REITs use affiliated companies for management, lead broker, and placement agents. Who is watching out for the investors?  No one!

All of these facts lead to problems for investors.  If you or someone you know lost money investing with Donald Woods, please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with an experienced securities attorney. When you call us, you won’t get a call-center or someone filtering calls! We are a contingency fee law firm offering representation to investors nationwide, which means we do not get paid until you do!

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