Posted On: August 24, 2011

Recovering Investment Losses in Desert Capital REIT

In June 2011, Desert Capital REIT was forced into an involuntary bankruptcy. Creditors with claims of over $43 million filed the petition to force the company into bankruptcy.

According to its website, Desert Capital was founded in 2003 and organized as a REIT with a goal to deliver attractive dividend income to investors through the acquisition of real estate loans and mortgage-backed securities.

Desert Capital REITs lost $21 million in 2007, $11 million in 2009, and another $26 million in the third quarter of 2010 alone. Desert Capital published a press release announcing it has "doubt as to ability to continue" and may have to be liquidated. In 2010, the Securities and Exchange Commission issued a subpoena to Desert Capital "pertaining to payments and transactions with related party, CM Capital." CM Capital and CM Securities are brokers that marketed the REIT and were operated by the same CEO as Desert Capital, Todd Parriott.

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Posted On: August 24, 2011

Blum Law Group Announces its Investigation of the Laeroc Funds

The Law Offices of Blum Law Group is currently investigating the LaeRoc Funds, including the Laeroc 2002 Income Fund LP, Laeroc 2004-2005 Income Fund LP, Laeroc 2005-2006 Income Fund LP, Laeroc Edge Fund LP and Laeroc Income Fund 007, LP.

The Laeroc funds are real estate private placements (under Regulation D) that were sold by brokerage firms like LPL Financial LLC and Commonwealth Financial Network. According to its website, Laeroc Funds is a real estate investment firm managing over $650 million in assets in the last 23 years and has created 14 funds. The Company focuses on income producing properties in the western US with a concentration in southern California.

Many of the Laeroc funds have suffered substantial declines in value. Laeroc 2002 Income Fund, L.P. recently announced the dissolution of the fund to its investors. While the Laeroc 2005-2006 Income Fund LP is currently attempting to raise another $11 million to $14.5 million to pay off at least $49 million of debt. This fund recently issued a cash call to investors, asking investors to contribute additional money for preferred partnership status.

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Posted On: August 19, 2011

Investors in Lehman Structured Notes Awarded the Return of the Their Entire Investment from Neuberger Berman

A FINRA arbitration ordered Neuberger Berman, an asset management firm, to pay three investors $5.5 million for damages related to the sale of failed Lehman structured products.

Neuberger was a unit of Lehman until 2009. It was found responsible for recouping the initial investments of the clients, plus interest and legal fees, after selling the Lehman-backed notes between June and August 2008. Lehman Brothers filed for bankruptcy a month later, leaving the investors with essentially worthless investments. The investors complained that the Neuberger failed to adequately disclose that the investments were actually Lehman debt instruments, not investments in the underlying indices.

This Panel’s award is similar to recent awards entered into by FINRA arbitration panels across the country related to Lehman structured notes, including principal protected notes. Claims that broker-dealers failed to disclose the specific material terms of the Lehman Brothers notes and obscured the risks inherent to the Lehman Brothers notes, namely that the principal was only protected by Lehman Brothers, continue to gain traction with FINRA arbitration panels. As recently as June, in a similar ruling, a FINRA arbitration panel awarded $2 million to NBA Philadelphia 76ers President Pat Croce against UBS Financial Services for an investment he made in a Lehman Brothers principal protected notes.

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Posted On: August 4, 2011

Broker-Dealers Charging Excessive “Postage and Handling” Fees

FINRA (Financial Industry Regulatory Authority) recently raised an issue concerning excessive postage and handling fees being charged by a number of small and mid-sized broker-dealers. In his speech to the attendees of FINRA's Annual Conference, FINRA Chairman and CEO Richard Ketchum said this:

"We are taking a close look at excess charges for routine services, which some firms appear to be treating as an additional de facto commission. Such charges include postage and handling charges for particular trades. You can expect to see some enforcement activity in this area with respect to particularly egregious examples."

Postage and handling fees charged by broker-dealers can range from a few dollars to $100 per transaction. There has been an increase in postage and handling fees by many broker-dealers since the market collapse in 2008 which left firms desperate for profits.

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