According to reports, the Financial Industry Regulatory Authority Inc. (FINRA) recently filed a complaint against a small broker-dealer that allegedly generated almost 95% of its revenue from the sale of nontraded real estate investment trusts and other illiquid investments.
Finra alleges that VFG Securities Inc. failed to supervise its brokers to ensure that clients’ portfolios would not become overly concentrated in such illiquid investments.
FINRA further alleges that from November 2010 to June 2012, VFG Securities generated almost 95% of its revenue from the sale of nontraded REITs and direct participation programs.
In the report, Jason Vanclef, the owner of VFG Securities, said that FINRA had been “persecuting” him since an exam of the firm in 2012.
The FINRA complaint also alleges that Mr. Vanclef used a book he had written, “The Wealth Code,” as sales literature to promote investments in nontraded REITs and direct participation programs.
Finally, the FINRA complaint alleged that Mr. Vanclef “repeatedly claimed in ‘The Wealth Code’ that nontraded [direct participation programs] and nontraded REITs offer both high return and capital preservation.” As the prospectus for these products indicate, nontraded DPPs and nontraded REITs are speculative investments that contain a high degree of risk.
The foregoing information, which is publicly available here, is being provided by The White Law Group.
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