Broker’s License Suspended for Fraudulent REIT Investments

Michael Hainsworth of Fort Myers, Florida, will not be trading or selling securities for at least 30 days because of securities fraud and misrepresentations he made to investors.   Hainsworth pleaded no contest to several allegations during a Financial Industry Regulatory Authority (“FINRA”) investigation.  While working for Ameriprise Financial Services Inc., Hainsworth sent numerous emails to potential investors in a non-exchange traded real estate investment trust (otherwise known as a “REIT”).  According to the FINRA complaint, these emails were misleading, false, and failed to provide a sound basis for an evaluation the facts.

REITs have been quite popular in the financial market.   A real estate investment trust is a company that owns, and in most cases, operates income-producing real estate.  REITs – quite literally – are all around us.  REITs own many of the shopping malls, apartment buildings, student housing complexes, homes, medical facilities, office buildings, hotels and cell towers that we use every day.  REIT-owned properties are located in every state and contribute millions of dollars in jobs and investment income to the national economy each year.  REITs are designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.  REITs can be publicly or privately held.  Public REITs may be listed on stock exchanges.  REITs can also be classified as equitymortgage, or a hybrid.

In his emails, Michael Hainsworth’s claimed that the REITs under his control “paid 6.25 and mature Dec 31st, 2015.”  At first glance this statement may seem harmless; however the average prudent investor would know that REITs do not provide any form of fixed income.  Nonetheless, Hainsworth induced at least four investors to move $50,000 out of the market into what he ostensibly purported to be a fixed income REIT.  Clearly Mr. Hainsworth either has no idea how a REIT works or he surreptitiously gave his clients the illusion that REITs provide a fixed stream of income – which they absolutely do not!

According to FINRA, Mr. Hainsworth has lost his license for 30 days because of his misleading emails.  But this is not the first time Hainsworth has been under the spotlight.  FINRA reports that Hainsworth has 21 disclosure statements and has been unregistered several times in the last ten years.  Hainsworth has worked for several broker-dealers including: Ameriprise Financial Services, Inc., Securities America, Inc., Prime Capital Services, Inc., SunAmerica Securities, Inc., BB&T Investment Services, Inc., and Edward Jones.  Although this email dispute has been settled, Hainsworth still has at least one other pending claim in FINRA.  In addition, it’s unknown if there are others who were misled or induced by his ignorance.

If you have suffered significant losses through investments made with Michael Hainsworth, or a different broker, you should be on high alert.  Contact the investor rights attorneys at Chapman LLC.    The attorneys at Chapman have decades of combined legal experience in recovering investors’ lost investment capital.   Please contact our office for a free initial consultation with one of our attorneys.

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