Oil and Gas DPPs From Just Two Sponsors Have Caused $3.7 Billion in Losses
We have written extensively about direct participation programs, or DPPs. See our blog posts on non-traded REITs and our discussion about equipment leasing DPPs. Oil and gas DPPs are another strain of the DPP epidemic: illiquid exposure to an existing underlying asset, loaded with confiscatory fees, conflicts of interest and unnecessary risk.
Oil and gas DPPs use some of investors' money to drill and operate oil and gas wells. Oil and gas DPPs are sponsored and managed either by investment...
Enforcement Actions: Week in Review - December 5th, 2014
SEC ENFORCEMENT ACTIONS
SEC Charges California Resident With Fraudulent Sales of Stock
December 2, 2014 (Litigation Release No. 268)
The SEC has charged Vinay Kumar Nevatia for fraudulently selling $900,000 of private shares of CSS Corp. The SEC contends that Kumar, living in Palo Alto under several aliases, sold shares in 2011 and 2012 that he had already sold in 2008. Kumar has never been registered with the SEC.
SEC Announces Fraud Charges Against Two Executives in Scheme Involving...
Monogram Residential Trust's Proposed Listing is Further Evidence That Even the Non-Traded REITs Winners Are Losers
The non-traded REIT, Monogram Residential Trust, rebranded from the Behringer Harvard Multifamily REIT I this April, is "exploring a potential listing on a national securities exchange", Monogram's CEO Mark Alfieri wrote in a letter to investors last month. Monogram's managers and senior advisors are optimistic that such a liquidity event will "maximize shareholder value". They claim that the REIT's main problem has been a lack of monetization. We disagree.
We have analyzed all of Monogram's...
United Development Funding IV Left Investors $34.8 Million Worse Off
On Wednesday last week, another non-traded REIT listed on a public exchange. United Development Funding IV (ticker: UDF), which sold as a non-traded REIT for $20 per share, closed its first day of trading on the NASDAQ at $19.60. As we have argued extensively in the past, we think that non-traded REITs are a very bad deal for investors, and UDF IV was no exception.
We have gone through all of UDF IV's SEC filings and applied the gross proceeds, distributions, and other cash flows to a liquid,...
FINRA Enforcement Actions: Month in Review
MAY 2014 SELECTED FINRA ENFORCEMENT ACTIONS
ABN AMRO Clearing Chicago LLC (CRD #14020, Chicago, Illinois)
ABN AMRO Clearing Chicago LLC consented to a censure and $95,000 fine for allegedly failing "to report short interest positions to the New York Stock Exchange and FINRA on certain settlement dates, and submitt[ing] to FINRA an inaccurate short-interest position report." FINRA found that the firm's supervisory system did not provide for supervision reasonably designed to achieve...
Non-traded REITs' Annualized Returns Were 4.82% Compared to Traded REITs' 10.44%.
We have posted previously about how non-traded REITs which have had "liquidity events" have destroyed $27.7 billion in investor wealth compared to traded REITS. See our other blog posts on Non-Traded REITs. In this post, we calculate that the 27 non-traded REITs we discussed in prior posts have an internal rate of return (IRR) of 4.82%, which is 5.62 percentage points lower than the 10.44% IRR of a liquid, diversified REIT mutual fund over the same time period, with the same cash flows.
FINRA Enforcement Actions: Month in Review
APRIL 2014 SELECTED FINRA ENFORCEMENT ACTIONS
The Huntington Investment Company (CRD #16986, Columbus, Ohio)
The Huntington Investment Company consented to a $25,000 fine and censure. The firm consented to an entry of "findings that it failed to provide notice to the MSRB via the Electronic Municipal Market Access System (EMMA) that no preliminary official statements or official statements were to be prepared for bond anticipation note offerings in which the firm participated."...
This is How We Determined Investors Lost $27.7 Billion Investing in Non-Traded REITs
Earlier this week we posted the summary results of our investigation into the performance of 27 non-traded REITs which had had a liquidity event by December 31, 2013. We found that investors are $27.7 billion worse as a result of investing in these 27 REITs rather than investing in a diversified portfolio of traded REITs. The post titled "Retail Investors Have Lost at Least $27.7 billion as a Result of Non-Traded REITs" is available on our blog.
Figuring out this $27.7 billion shortfall...