A REIT is a tax designation for a corporate entity investing in real estate for the purposes of reducing or eliminating corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.

From 2008 through today, REITs faced challenges from a slowing economy as well as the late-2000s financial crisis, which, in some cases, depressed share values by 40 to 70%. The collapse of the housing markets and real estate sector has made REIT fraud more apparent. Claims are being brought against brokerage firms for unsuitable recommendations, fraudulent REITS that were Ponzi schemes or failures to disclose high fees and commissions associated with such REITs. Firms targeted unsophisticated, elderly, retired and conservative customers to invest large concentrations of their net worth is such products, which were often illiquid, while misrepresenting such unsuitable risky investments as alternatives to conservative investments; likely due to the high fees and commissions associated with such products, sometimes as high as 15% of the initial investment.

Investors have had billions lost or frozen in non-traded REITs which were recommended by financial advisors at brokerage firms and banks. Many of such non-traded REITs have sustained substantial mark downs in price and/or have been fraudulently over-valued and misrepresented to clients by brokerage firms. In addition, many of such investments are completely illiquid. As a result, clients are unable to access the funds invested, a risk not accurately disclosed to investors.

If you were a victim of such impropriety and have sustained substantial losses by investing in REITs, you may be entitled to recover damages. Please contact the Law Offices of Stuart D. Meissner LLC, www.StockESQ.com which is nationally known for its record win statistics in FINRA Arbitration, toll-free at 866-764-3100 for a free consultation and to explore your legal rights and options.

Retail investors were allegedly often told that such investments were as safe and secure as a de-facto government backed bond, when, in reality, such was not the case. Preferred stocks of Fannie Mae and Freddie Mac carried significant risks and these risks were simply never disclosed to investors. Investors were not told that preferred stocks are much more volatile than bonds. Preferred shares have some characteristics that make them unique and much riskier than the guaranteed status of Corporate Bonds, as they were often pitched to be. First, just as with common stock, preferred stockholders in Fannie Mae and Freddie Mac stand behind bond holders in line for the company’s assets if and when it should run into a financial problem. If a company like Fannie or Freddie fails, funds would be repaid to bondholders first. This added extreme default risk to the holders of Fannie and Freddie preferred stock, a risk which was often not disclosed to investors. Bond-holders in Freddie Mae and Fannie Mac were fully protected while preferred stock holders were not. Further, just as with dividends paid on common stock, Fannie Mae and Freddie Mac could have (and indeed did) eliminated preferred dividend payments, an important disclosure fact related to the investment in a product for income purposes.

In or around March of 2008, Fitch Ratings had downgraded Fannie Mae’s preferred stock rating. The Fitch downgrade in the securities rating would not be its last, eventually being downgraded by Moody’s to the lowest investment grade credit rating in August of 2008. Further, on, or around, September 8, 2008, United States Treasury Secretary Henry Paulson announced that Fannie Mae and Freddie Mac would be placed under Federal Housing Finance Agency conservatorship, eliminating all future dividend payments. When Fannie Mae and Freddie Mac were placed in conservatorship by the federal government on September 8, 2008, investors in Freddie Mac and Fannie Mae preferred stock watched their investment become essentially worthless. Fannie Mae and Freddie Mac preferred stock was promoted by investment firms even in the face of the companies’ plummeting financial condition. As reported in a July 7, 2010 article in Forbes titled How Fannie and Freddie Unloaded Their Trash, firms, including Merrill Lynch, earned more than one-third of a billion dollars in fees between November 2007 and June 2008 in relation to such securities. As for the investors in such products, they saw their investments become essentially worthless with the deepening of the U.S. housing crisis. When the federal government seized and took over Fannie Mae and Freddie Mac after the two companies suffered huge loan losses and placed them into conservatorship, such investments were wiped out in almost their entirety.

If you were a victim of such impropriety and have sustained substantial losses by investing in Fannie Mae and/or Freddie Mac Preferred Securities, you may be entitled to recover damages. Please contact the Law Offices of Stuart D. Meissner LLC, which is nationally known for its record win statistics in FINRA Arbitration, toll-free at 866-764-3100 for a free consultation and to explore your legal rights and options.

NEW YORK, April 25, 2011 (GLOBE NEWSWIRE) — A Boca Raton, Florida Based Financial Industry Regulatory Authority (FINRA) arbitration panel awarded $2,388,230.05 to a client of the nationally recognized Manhattan, NY Securities Arbitration Law Firm of Stuart D. Meissner, LLC. The award was 100 cents on the dollar for the alternative damage figure presented to the panel of three arbitrators for the mishandling of its client’s account and at least 138% over any potential settlement being offered. The panel also assessed all $32,400 in forum fees against the brokerage.

The focus of the claim was the failure of Morgan Stanley Smith Barney (NYSE:MS – News) and its predecessor firm Smith Barney to properly protect a large over-concentrated position in American Express stock, which account contained a substantial margin balance, the failure to recommend proper hedging strategies, unsuitability and the inept implementation of options transactions, as well as unauthorized trading commencing in October 2008, coinciding with the financial collapse of 2008. As asserted in the Claim, the Meissner firm’s 85 year old client was formerly a highly sophisticated investor, having been a Regional Director in the former Shearson Lehman/American Express up until his retirement in the 1980s. The employment was the originating source of the stock at issue in the Claim. The client was suffering from Dementia in 2007 and all trading in the account ceased and remained dormant from 2007 up until October 2008, when the client’s wife and daughter sought assistance, as the account collapsed without anyone managing the account, and as the brokerage firm failed to contact the family to recommend any hedging strategies, such as a European or OTC Collar, which would have protected the account. In October 2008 the client’s family sought out the assistance of their broker, David Dworsky, who was based in the New York city branch and was referred by him to a fellow broker, Martin Askowitz, who was known as the branch’s options expert. Following an internal agreement between the two brokers to divide commissions, Mr. Askowitz then entered a series of options trades over the next several months which resulted in charging the client over $60,000 in commissions alone; such negligent trading was the focus of the arbitration hearing in which ten witnesses testified, including Askowitz and Dworsky, as well as a neurological expert on dementia.

“The award represents 100% of the alternative damage analysis presented to the panel during the hearing on behalf of our client,” stated Stuart D. Meissner Esq., who represented the investors. Meissner continued, “This case represents the beginning of a growing trend of cases involving financial advisors who either take advantage of, or fail to protect their elderly clients suffering from dementia, Alzheimer’s and other ailments, consistent with NTM 07-43.” FINRA Notice to Members 07-43, issued in September 2007, reminded the brokerage industry of their obligations relating to Senior Citizen investors. “Due to the nature of the victim in this matter, this case should be the poster child for the industry to be proactive in protecting its Senior clients rather than sitting on its hands or worse, collecting fees off these accounts and taking advantage of these clients and their unsophisticated families.”

The Meissner firm maintains its unique record of never having lost any in-person arbitration.*

*Prior results do not predict a similar outcome in the future.