IMS Securities Broker Michael J. Spears; Non-traded REIT Unsuitability Allegations

Silver Law Group is investigating Houston, Texas-based IMS Securities Inc. (CRD# 35567) broker Michael J. Spears (CRD# 4501523) after two (2) customers filed complaints against Spears regarding non-traded REITs.

According to Spears’ FINRA BrokerCheck report, two customers filed complaints against Spears in 2016. The first, in August 2016, alleges negligence, misrepresentation, failure to supervise, breach of fiduciary duty and involves non-traded REITs. The FINRA arbitration claim alleges over $1.6 million in damages.

The second, filed in July 2016, also involves real estate securities as well as variable annuities (“VAs”). This FINRA arbitration complaint alleges negligence, overconcentration, breach of fiduciary duty, misrepresentations, failure to supervise and damages in the amount of $3 million.

IMS Securities has employed Spears the entirety of his career at its Houston, Texas location.

IMS Securities has been sanctioned by FINRA for supervisory failures related to its business selling VAs in September 2016 as well as its business selling non-traded REITs in December 2012 for a total of $200,000.

Public non-traded REITs are public because they have the minimum number of shareholders required to be public but are non-traded because they are not listed or traded on a major stock exchange.

Public non-traded REITs have typically been advertised and peddled as sound retirement vehicles due to the high dividend payout, but the product has notoriously been flawed. In recent years, both the SEC and FINRA have issued warnings and guidance on public non-traded REITs, noting the high fees (front-end fees can be as much 15 % of the per share price), distributions that come from the principal, lack of share transparency, and the extraordinary lack of liquidity.

Additionally, many public non-traded REITs often start out as “blind pools,” which means that the REIT takes in investor monies before disclosing exactly how those monies will be invested and simply states what types of properties the REIT plans to buy, rather than disclosing the exact properties that will be owned. Lastly, an external manager usually makes investments on behalf of the public non-traded REIT, creating potential for conflicts of interest.

An example of a public non-traded REIT is United Development Funding (“UDF”). While the REITs issued by UDF have been subject to Ponzi-scheme allegations, the public non-traded REIT risks were present regardless. Nicholas Schorsch, whose company assisted in the offering of one of UDF’s REITs, formerly built much of his now-diminished business on public non-traded REITs, a list of which can be found here.

If you have invested with Michael J, Spears and IMS Securities and have lost money doing so, you may be able to recover some or all of your losses. Our lawyers are experienced in recovering investor losses due to broker and brokerage firm misconduct through FINRA arbitration.

Silver Law Group represents the interests of investors who have been the victims of investment fraud. If you have questions about your legal rights, please contact Scott Silver of the Silver Law Group for a free consultation at ssilver@silverlaw.com or toll free at (800) 975-4345.