Claims Filed Regarding Former Sarasota Financial Advisor Marc Korsch for Sale of Allegedly Speculative and High-Risk REITs and Illiquid Investments to Retirees
The Levin Papantonio Rafferty law firm announced today that it has filed claims on behalf of retiree investors who are former clients of Sarasota-area Financial Advisor Marc Korsch and NAV Advisors. According to his FINRA Brokercheck report, Mr. Korsch’s securities registration terminated last week on Friday, September 3 – which may leave clients stuck with illiquid investments that they cannot sell. The claims filed allege that Korsch and his former employer, Centaurus Financial, recommended high risk and speculative investments. The claims allege that these speculative and high risk investments were represented as being conservative, low risk, or investments that would protect retirees’ principal. Instead, the investments were illiquid, suffered from significant conflicts of interest, and charged significant fees, commissions, and expenses.
“When Financial Advisors misrepresent the investments they sell or recommend unsuitable investments to their customers and cause harm, they must be legally held accountable,” said Levin Papantonio Rafferty shareholder and attorney Michael Bixby. “We are working to help recover the unnecessary losses suffered by our clients and investigating any other claims for others who may have been harmed. Many folks who were sold risky and illiquid investments may not even fully understand the damages they have suffered.”
The Levin Papantonio Rafferty law firm’s investigation of Mr. Korsch has uncovered audio recording evidence dating back to 2014 confirming that Mr. Korsch claimed the investment strategy he offered for clients involved “protecting their income” and helping clients avoid outliving their retirement savings by “protecting their principal so that it doesn’t go down.” An investigation of Mr. Korsch’s writings, like his chapter in the book “Successonomics,” confirms that he claimed to educate the community on “conservative alternatives.” In the chapter, he discussed his “conservative business model” and claimed he recommended products including some REITs because they “pose little risk.”
“Our investigation has revealed that multiple Mr. Korsch and Centaurus’ clients were sold illiquid non-traded investments,” Mr. Bixby went on to explain, “including the Parking REIT (formerly known as the MVP REIT), Cottonwood Residential REIT (also known as Cottonwood Communities, Inc.), FS Energy and Power Fund, FS KKR Capital (formerly FS Investment Corp.), among others. These investments are complex, opaque, and difficult even for many sophisticated individuals to understand. FINRA has long warned advisors and firms about these types of non-conventional investments, and proper due diligence of these investments should have revealed that these investments were speculative or high risk investments inappropriate for conservative, low risk, or investors with a goal of protecting their principal.”
A 2003 notice from the securities regulator FINRA (Financial Industry Regulatory Authority) cautioned that non-conventional investments “with particular risks may be suitable for recommendation to only a very narrow band of investors.” Despite FINRA’s warnings, Mr. Korsch and Centaurus allegedly recommended the speculative and high risk investments to multiple clients. Many of the investments allegedly recommended are illiquid, and dividends and distributions have been reduced or suspended for some of the investments.
It is estimated that shareholders of the Parking REIT/MVP REIT may have lost as much as 80% of the principal they invested. The FS Energy and Power Fund may have suffered similar losses of approximately 80% of the original principal invested. Meanwhile, Cottonwood Communities, Inc.’s recent SEC Filings reported net losses per share in 2020 and so far in 2021, and the total stockholders’ equity declined by over $7.5 million from December 31, 2020 to June 30, 2021.
An investigation of Marc Korsch’s regulatory record, available from FINRA’s Brokercheck system, reveals a significant number of disclosures – fourteen in total. Prior to the filing of the claim by Levin Papantonio Rafferty today, Mr. Korsch’s record included over half a dozen customer claims or complaints according to FINRA’s Brokercheck report. “Based on the data from FINRA, these complaints and disputes place Mr. Korsch approximately in the top 99.96% of Financial Advisors for customer complaints and disputes – the top half of the 99.9th percentile” Bixby explained.
Centaurus Financial, the firm that employed Korsch from 2014 until 2021, is a national independent broker/dealer. Centaurus has faced criticism in the past for its sale of non-conventional and illiquid investments. According to a 2017 study by the Securities Litigation Consulting Group, Centaurus and its affiliates are rated among the top 20 of the worst brokerage firm offenders in the nation for customer complaints and harm and #6 of the top 10 worst firms ranked by illiquid product-related customer complaints.
Fortunately, investors who were sold unsuitable or risky investments may have a right to file a claim to recover their losses. The Levin Papantonio Rafferty law firm represents investors on a contingency fee basis (no fee if no recovery) and offers free and confidential claim reviews and consultations. The firm announced it is still investigating further claims and accepting new clients.
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