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Real-estate regulatory agency expels California firm

Commercial real estate is a complex business sector with many ways that well-meaning investors can find themselves on the wrong end of a bad deal. One of the regulatory bodies that seeks to keep dealings in the commercial real estate community above board is the Financial Industry Regulatory Authority, pr Finra, a private regulatory organization. Just recently, Finra expelled a California real estate firm for apparently negligent misrepresentations to investors.

Finra maintains that the CEO of the expelled firm neglected to disclose complaints against him in the course of three separate private-placement offerings to investors. In addition to failing to release information to investors about the complaint filed against him by the California Department of Real Estate, Finra asserted that the CEO of the firm had prematurely released escrow proceeds in order to purchase additional properties before meeting the fundraising thresholds defined in two of the private offering agreements.

These private fundraising efforts featured dollar-amount thresholds that would have to be met or surpassed by certain dates, or else the money raised from private investors should have been returned to the investors. According to a statement by Finra, the firm "prematurely released escrow funds before reaching the minimum contingency in one offering and by failing to meet the minimum contingency through bona fide sales in another offering."

Misrepresenting elements of an investment structure to investors does not make for an ideal investment environment. Investors, both public and private, would be understandably furious to learn that their hard-earned money is not being used in the ways that they approved according to their original agreement. In some cases, negligence can lead to de facto defrauding of investors, and should not be tolerated. If you believe that your commercial real-estate dealings are not being represented to you truthfully, an attorney with experience in commercial real-estate can help you sort through the fine print as you explore your options for fair compensation.

Source: Investment News, "Finra expels real-estate investment firm formerly known as DT Securities and its CEO," Christine Idzelis, Sep. 26, 2016

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