New York Securities Lawyer Blog
On February 4, 2016, a Financial Industry Regulatory Authority (“FINRA”) panel (the “Panel”) awarded Herbert M. Doucet and Margie Doucet (collectively “Claimants”) $307,000 for losses stemming from investments in direct participation programs (“DPPs”) involving non-traded real estate investment trusts (“REITs”), promissory note programs, master limited partnerships (“MLPs”) and private oil drilling programs offered by VSR Financial Services, Inc. (“VSR”). VSR is a small, full-service securities broker-dealer founded in 1985, focusing on long-term strategies and products.
In their Statement of Claim, the Claimants alleged the following causes of action against VSR: breach of fiduciary duty; fraud, misrepresentation and non-disclosure; negligence and gross negligence; breach of contract; violation of Louisiana Blue Sky Law; and unjust enrichment.
The amount awarded reflects almost all of the $308,221 in compensatory damages the Claimants originally sought. The Panel further held that the Claimants could retain their investments in these DPPs, specifically MPF Senior Note Program I, Atlas America Series #25 – 2004, AmREIT Monthly Income & Growth II, Cole Credit Property Trust, and ArciTerra Note Fund II.
These investments were marketed to investors as safe, income-generating investments. However, in reality, these oil and natural gas related investment products are risky, illiquid and complex investments that are unsuitable for conservative and even some moderate investors who were concerned with preserving principal. Within the last year, such investments have lost, in some instances, more than 50% of their value as a result of the sharp decline of the oil and commodities markets, and numerous income-producing investments have ceased to yield dividends, in contravention of the promises and representations by broker-dealers that investors would be receiving income from certain investments and that their principal would be protected. Some investors were even reportedly told that their investments were not linked to oil price volatility because the underlying companies generated consistent revenue from other sources. While investors have suffered alarming losses in the oil and natural gas related investments, broker-dealers such as Citigroup, Barclays, Wells Fargo, Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs, Morgan Stanley, UBS and JP Morgan have made approximately $1.1 billion in fees and commissions from selling these products.
If you have lost money investing in these products or have information about broker-dealers’ or banks’ marketing and sale of these products, please call Lax & Neville LLP, (212) 696-1999.