Articles Tagged with FINRA Enforcement

Stoltmann Law Offices, P.C. has represented hundreds of investors in arbitration actions against brokerage firms for losses in connection with non-traded Real Estate Investment Trusts (REITs). Non-Traded REITs are the darlings of brokers and their firms because of the huge commissions and “hands-free” management approach they foster. Brokers sell non-traded REITs under the guise of “high income” and “non-stock market risk”, when the money investors receive from REIT distributions is mostly made up of their own money, and are actually as speculative to invest in as the stock of any company.

According to FINRA, the regulatory agency responsible for policing brokers and their firms, Mike Patatian sold made 89 unsuitable recommendations to 59 clients who invested more than $7.8 million in non-traded REITS. FINRA alleges that Patatian did not understand the REITs he sold, including basis features and risks, and therefore lacked a reasonable basis to make the recommendations. Patatian is also alleged to have recommended that clients liquidate annuities, incur surrender charges, and then roll the proceeds into non-traded REITs. He is also accused of inflating client net worth on forms in order to circumvent REIT limitations. Patatian denies FINRA’s allegations, which can be found here.

Stoltmann Law has blogged extensively on issues related to non-traded REITs. Between the speculative risk, high commissions, lack of liquidity, and complicated structure, there are numerous better options for an investor who wants exposure to the real estate sector. There are hundreds of fully liquid REITs traded on the New York Stock Exchange every day for investors that want to invest in REITs. There is no reason to invest in a non-traded REIT other than the sales pitch by the broker selling them.

Today’s Wall Street Journal profiles a $1.2 million FINRA arbitration claim filed by Stoltmann Law Offices against Merrill Lynch.  The article details the abuses engaged in by the firm in selling the Strategic Return Notes to retail investors and our efforts to recover these losses through claims for fraud, unsuitable investment recommendations and lying about the risks associated with these investments (the entire article can be viewed at the following link  The case centers around secretly recorded phone conversations, secured by Stoltmann Law Offices, of 13 conversations between the Merrill Lynch financial advisors and senior Merrill Lynch executives, including Brian Partridge, head of U.S. product sales for Merrill’s wealth-management division at the time.  As alleged in our FIRNA Statement of Claim, the Merrill Lynch advisers were told on the calls not to suggest to their clients the product was flawed. “What you’d love to do is avoid customer complaint,” Mark Ryan, a manager at the firm, told the brokers. “We can’t just tell everyone, ‘Hey this is a defective product.’”

Due to the allegations we made in the Statement of Claim and in working with two major regulators, we were able to get Merrill Lynch fined for these sales practices in the amount of $15 million.  Both the Securities and Exchange and FINRA Enforcement fined Merrill Lynch for these abusive practices associated with the structured products (please see here for the SEC Enforcement action and here for the FIRNA Enforcement action

If you’d like to learn how to sue Merrill Lynch for abusive structured product sales, please call our investment fraud firm in Chicago, Illinois.

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