Finra says it is investigating REIT maven Tony Thompson for allegedly failing to turn over documents to the regulator. Bruce Kelly reports.
Troubles are mounting for noted real estate investor Tony Thompson. The Financial Industry Regulatory Authority Inc. has said it is investigating him and his broker-dealer, TNP Securities LLC, for failing to turn over documents to Finra, thus potentially breaking its rules.
Mr. Thompson already is facing significant financial hurdles, most notably the default last year on $21.5 million of private notes he sold in 2008 and 2009 to raise money for his latest venture, Thompson National Properties LLC.
By failing to turn over documents to Finra, Mr. Thompson allegedly violated industry rules that require firms and individuals to produce information. He also allegedly broke rules requiring high standards of commercial conduct and fair principles of trade, according to Mr. Thompson's BrokerCheck report.
The broker-dealer he owns, TNP Securities, meanwhile, also is under Finra investigation for alleged violations of the same rules. Finra's investigation of the broker-dealer focuses on its failure “to produce a privilege log for approximately 316,000 attorney-client privilege e-mails.”
A privilege log is a list of the privileged e-mails sent between an industry executive and an attorney. If an executive asserts attorney-client privilege, the executive has to create a log listing those documents, industry attorneys said.
In an e-mail to InvestmentNews, Mr. Thompson wrote: “The biggest challenge [is logging] 316,000 attorney-privileged e-mails, which would take one person potentially a few years” to create. When asked what Finra was looking for, Mr. Thompson wrote: “Don't know.”
Finra spokeswoman Nancy Condon declined to comment.
According to the BrokerCheck reports, Finra in January made the inquiries regarding the documents. At that time, Mr. Thompson was attempting to goose sales for a nontraded real estate investment trust, the $272 million TNP Strategic Retail Trust Inc.
That month, Mr. Thompson sent a note to broker-dealers hawking the REIT, stating that its net asset value was 6% higher than its share price. Such a discrepancy between a REIT's selling price and its NAV could be dilutive to shareholders as well as provide brokers with a sales pitch laden with urgency, several industry observers noted at the time.
Mr. Thompson, chief executive of Thompson National Properties, launched his firm in 2008. Earlier, he founded Triple Net Properties LLC, which packaged real estate investments called tenant-in-common exchanges, which were sold through independent broker-dealers during the real estate bubble.
In 2007, a related company, NNN Realty Advisors Inc., merged with Grubb & Ellis Co. Burdened by debt, that once-iconic commercial real estate company filed for bankruptcy protection last February and then sold its remaining assets for $30 million.
