On November 7, 2019, an arbitration panel for the Financial Industry Regulatory Authority (FINRA) ordered Watsonville, California, stockbroker Kenneth Barroga and Crown Capital Securities, L.P. to pay over $160,000 in damages to a customer who had invested her entire life savings in non-traded real estate investment trusts (REITs) and business development companies (BDCs). The award included damages for elder financial abuse.
The REITs and BDCs involved are listed below:
REITs & BDCs
- Business Development Corporation of America
- Sierra Income Corporation
- Steadfast Income REIT Inc.
- ARC Realty Finance Trust Inc.
- Benefit Street Partners Realty Trust, Inc.
- ARC Healthcare Trust II
- Healthcare Trust, Inc.
- Northstar Healthcare Income
Because they are not listed on a stock exchange and are not publicly traded, non-traded REITs and BDCs are highly illiquid and not suitable for investors who need or want access to their funds. REITs and BDCs will usually allow investors to redeem their shares—but customers who want to access their funds are often surprised to learn that the right to redeem is subject to significant limitations and that the company can cancel redemptions at any time. For this reason, non-traded REIT and BDC are considered risky investments and customers must meet certain minimum net worth requirements in order to qualify. For example, California residents usually may not invest more than 10% of their net worth (excluding their personal residence) in any single REIT or BDC investment.
As part of the arbitration award, Kenneth Barroga and Crown Capital were found jointly and severally liable for attorney fees and punitive damages pursuant to California’s Elder Abuse Statutes. The customer was represented by attorney Brett Alcala of the Alcala Law Firm. Click here to request more information.