California Investors Allege Unsuitable DST Recommendations in FINRA Arbitration
From the desk of Jim Eccleston at ÍøÆسԹÏ
Two investors from the San Francisco Bay Area have filed a FINRA arbitration claim against brokerage firm Realized Financial and its financial advisors. They allege that the firm failed to provide prudent investment advice and instead steered them into unsuitable Delaware Statutory Trust (DST) investments sponsored by Inspired Healthcare Capital (IHC).
According to the claim, the investors lacked specialized knowledge of the securities industry and relied on professional guidance for their retirement planning. They retained Realized Financial for that purpose. The investors assert that the firm’s advisor, Robert Johnson, held himself out as an expert in DSTs and emphasized the purported benefits of the tax-deferred 1031 exchange structure associated with these products.
The investors contend that DSTs proved inappropriate for their financial circumstances as near retirees. These were alternative investments, and illiquid, characteristics that the investors allege conflicted with their need for stability and access to capital. They further claim that the firm and its advisor failed to fully disclose the significant risks tied to the investments, including layers of legal and professional fees that allegedly reached as high as 12.5 percent.
Inspired Healthcare Capital, the DST sponsor at the center of the dispute, is now defunct. Investor distributions have ceased, and the company remains under investigation by the SEC. The investors allege that these developments underscore the risks that the Respondents should have clearly explained before recommending the investments.
ÍøÆØ³Ô¹Ï LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, finra
