Finra arbitrators awarded eight retirement investors more than $1 million in a case involving unsuitable investments in a Texas real estate investment trust.
The plaintiffs alleged that IMS Securities Inc., a now-defunct brokerage that operated in Houston, encouraged them through a party not named in the case to buy for their retirement accounts high-risk, illiquid shares in three REITs: United Mortgage Trust, United Development Funding II and United Development Funding III.
The investors asserted IMS Securities aided and abetted fraud, breached its fiduciary duty and engaged in a conspiracy. They were awarded $1,019, 211.
Earlier this year, the REITs reached an $8.2 million settlement with the Securities and Exchange Commission for failing to disclose to investors that they could not meet their distribution payments.
The Financial Industry Regulatory Authority Inc. expelled IMS Securities from the industry in September. The firm had withdrawn its Finra registration last December, according to its BrokerCheck profile.
The plaintiffs asserted that IMS Securities had committed RICO violations. The Finra arbitrators awarded the amount of compensatory damages that the plaintiffs requested but did not triple the individual awards, as they could have under RICO laws.
Jackie Divono Wadsworth, who was chief executive of IMS Securities and also a respondent in the case, could not be reached for comment.