FINRA Awards $1,019,211 to Investors for Unsuitable Investment Recommendations in High-Risk REITs
Posted on Monday, November 26th, 2018 at 9:25 am
In November 2018, a FINRA arbitration panel awarded eight investors $963,836 for compensatory damages plus $5,000 in costs, $50,000 in attorneys’ fees and the $375 non-refundable filing fee, for a total award of $1,019, 211. The case was regarding unsuitable investment recommendations in three high-risk, illiquid shares in three REITs: United Mortgage Trust, United Development Funding II and United Development Funding III. The customers were clients of IMS Securities Inc., a now-defunct brokerage firm in Houston, Texas.
According to the award, the clients were recommended to invest the high-risk, illiquid shares in United Mortgage Trust, United Development Funding II and United Development Funding III in their retirement accounts.
The causes of action included aiding and abetting fraud, aiding and abetting breach of fiduciary duty, civil conspiracy, civil RICO, civil RICO conspiracy, and negligent supervision. The causes of action related to Claimants’ allegations that a non-party under the supervision of Respondents induced Claimants to invest in unsuitable, high risk, illiquid investments, including United Mortgage Trust (“UMT”), United Development Funding II (“UDF II”), and United Development Funding III (“UDF III”). The FINRA arbitration hearing was conducted in Detroit, Michigan.
FINRA expelled IMS Securities Inc. from the securities industry in September 2018, and the firm withdrew its FINRA registration in December 2017. According to Investor News, the firm was under investigation by the FBI, and “in February 2016 the FBI raided the suburban Dallas offices of UDF IV and management of the company was subpoenaed to hand over company documents to a grand jury. The share price of UDF IV collapsed after news of the FBI raid came to light.”
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, IMS Securities Inc. may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.