April 2011 Archives

April 25, 2011

IMH Financial Corporation Planning a $50 Million Recapitalization Loan and Shareholder Tender Offer

According to IMH Financial Corporation's latest SEC filing, the company entered into a funding commitment letter with NWRA Ventures I, LLC on April 20, 2011 to obtain a $50 million loan from MWRA for a period of five years at a rate of 17% per year. Under the terms of the arrangement, Shane Albers will resign from the company and receive a $550,000 severance payment, a renewable $20,000 per month "transitional consulting" fee and more than $200,000 in expense reimbursements.

In addition, IMH reported that NWRA plans to submit a cash tender offer to purchase up to $10 million worth of Class B or Class C shares from IMH stockholders. According to the SEC filing, the offer price is expected to be at "a substantial discount to the current book value per share of our common stock."

Following completion of the loan closing, the company also intends to offer existing investors the opportunity to purchase an aggregate of $10 million of convertible notes.

For more information:

April 17, 2011

Investor Sues Ameritas Over Recommendation to Use Real Estate Loans to Invest in Private Placements

home loan.jpgOur law firm recently filed a securities arbitration claim before the Financial Industry Regulatory Authority (FINRA) on behalf of a Northern California woman who was encouraged by her investment advisor at Ameritas Investment Corporation to take out real estate loans so that she could invest in the IMH Secured Loan Fund, a private placement that was exempt from Federal securities registration requirements. The mistaken assumption in many of these cases is that the high yield offered by the investment can be used to pay the mortgage. Unfortunately for our client, a few months after she made her investment, the fund stopped making interest payments and accepting liquidation requests from investors.

As our client's case illustrates, using a home loan to make investments is usually a bad idea and, when the investment is a speculative private placement that cannot be publicly traded or easily liquidated, it is never a good idea. [Click here for more information about private placements.] This isn't the first time that Ameritas has run into trouble for inducing customers to take out additional mortgages and home equity loans to invest. In August 2009, FINRA fined Ameritas $100,000 for failing to adequately supervise a broker who used misleading financial plans to recommend that customers refinance their homes or take out home equity loans to pay for the purchase of securities. FINRA fined the broker $60,000 and suspended her for 60 months.

When it comes to investing in securities, always invest within your means and never bet the farm.

Related Blog Posting:

Even for Accredited Investors, Stockbroker Recommendations to Buy Private Placements Are Subject to the Suitability Rule

April 15, 2011

IMH Financial Corporation's Latest SEC Filing Reflects a 73% Decline in Value

Thumbnail image for cards.jpg Although there is no news to report regarding the proposed IPO from IMH Financial Corporation, the company did file a new Form 10-K with the Securities and Exchange Commission (SEC) today. According to the SEC filing, the book value for IMH Financial Corporation shares (as of December 31, 2010) was $11.98 per share, which represents a 20% decrease from the company's previously reported book value of $15.05 per share.

Under IMH's new valuation, a $100,00 investment in IMH is now worth approximately $26,397, which gives new meaning to the company's motto:

Don't lose the money

Since IMH Financial Corporation stock is not publicly traded, investors are unable to sell their stock at any price.

Customers who purchased IMH Secured Loan Fund units through a securities broker may be able to recover damages by pursuing an arbitration claim before the Financial Industry Regulatory Authority (FINRA).

Related Entry:

Investor Sues Ameriprise Over Recommendation to Use Real Estate Loans to Invest in Private Placements

April 7, 2011

SEC Files Securities Fraud Lawsuit Against Southern California Wealth Manager

Thumbnail image for Thumbnail image for sec crest.bin.jpgToday, the Securities and Exchange Commission (SEC) announced the filing of a civil securities fraud lawsuit against Southern California wealth advisory firm MAM Wealth Management, LLC (MAM), MAMW Real Estate General Partner, LLC (MAMW), Alex Martinez and Ralph Sanchez. The action alleges securities fraud in connection with client investments of $10.3 million in a risky real estate investment. According to the complaint, from 2007 through 2009, Martinez and Sanchez advised 50 of their clients to invest in MAM Wealth Management Real Estate Fund, LLC (MAM Fund) and misrepresented that the MAM Fund was a safe and liquid investment with 9% annual earnings. Martinez and Sanchez are alleged to have used their discretionary authority over their clients' accounts to invest in the MAM Fund despite its unsuitability for their conservative investment goals. Many of these client accounts were retirement accounts and the MAM fund was unsuitable for clients who were unable to accept the risk of losing their entire investment. According to the SEC, the defendants caused the MAM Fund to use client funds to make risky mortgage loans. In its action, the SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and monetary penalties.