Erez Law is currently investigating Foothills Securities, Inc. (CRD# 1027) in Santa Clara, California regarding its failure to establish a reasonable supervisory system and procedure concerned the sale of non-liquid Real Estate Investment Trusts (REITs) in amounts that exceeded the firm’s asset concentration guidelines. Real Estate Investment Trusts are securities that invest in real estate through property or mortgages. They often trade on major exchanges like a stock and they are extremely liquid investments.
According to the Acceptance, Waiver and Consent form available on the FINRA website, Foothill Securities, Inc. was censured and fined $30,000 regarding its failure to establish reasonable supervisory systems and procedures concerning sales of non-liquid REITs in amounts that exceeded the firm’s asset concentration guidelines in at least 22 customer accounts. The firm’s guidelines states that, “no single order in one non-liquid product should equal more than 10% of a customer’s investable net worth as of the time the order is placed and that no order should cause a customer to have more than 20% of his or her investable net worth in non-liquid Investments.”
FINRA found that the firm, “maintained written guidelines for limiting customers’ investments in non-exchange-traded REITs and other non-liquid investments that stated that no single order in one non-liquid product should equal more than 10 percent of a customer’s investable net worth as of the time the order is placed, and that no order should cause a customer to have more than 20 percent of his or her investable net worth in non-liquid investments.” Despite this, one of the firm’s registered representatives requested a customer signature to acknowledge that the customer was purchasing a non-traded REIT in an amount that exceeded the guidelines. The representative then recommended investments in non-exchange-traded REITs for other customers outside of company guidelines. Foothills Securities approved those sales, despite violating their own guidelines.
Additionally, “the firm did not provide these registered representatives or their supervisors with adequate guidance about how to assess whether an additional REIT transaction would result in the customer exceeding the guidelines in the aggregate, and whether additional investments in non-exchange-traded REITs were suitable.”
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, Foothills Securities may be liable for investment or other losses suffered by its customers.
Erez Law represents investors in the United States for claims against Foothills Securities, regarding supervisory systems pertaining to the sale of non-liquid REITs. If you were a client of Foothills Securities or another firm, 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.
"*" indicates required fields
