Our 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