Pasadena-Based Western International Securities Fined $400k for Deficient REIT Supervision

Attorney Advising Disclaimer

FINRA fined and censured Western International Securities in Pasadena, California for failing to supervise its non-traded real estate investment trust (REIT) business and for failing to report complaints, arbitrations, and settlements as required by industry rules.

Two years after FINRA fined Western International $325,000 for supervisory deficiencies in failing to inform regulators that 52 of its brokers had $5.6 million-worth of liens, judgments, and/or bankruptcies, FINRA again disciplined Western International Securities, fining the firm $400,000 for, amongst other violations, disclosure failures.

FINRA also sanctioned Western International for a failure to supervise non-traded REITs, with investors finding that Western International brokers and supervisors failed to review some non-traded REIT disclosure forms to assess suitability.

The report explains that some of the forms' deficiencies included customer ages, investment objectives, experience levels, preferred time horizons, liquidity needs, risk tolerance preferences, and personal fiscal characteristics such as income and net worth. Investigators found that in some cases, brokers even misrepresented customer data, resulting in over-concentration or other adverse and damaging outcomes.

FINRA cited the example of Western International Securities broker Megurditch "Mike" Patatian recommending $7.8 million in non-traded REITs to 59 firm customers without a reasonable basis to believe the recommendations were suitable, and in some cases improperly recommended elderly clients surrender variable annuities (incurring charges for doing so) in order to purchase the unsuitable REITs.

While broker Patatian enjoyed significant commission income from the REIT sales, according to investigators, the customers suffered from these unsuitable investments. FINRA barred Patatian in June 2022 for unsuitable REIT and variable annuity recommendations.

If you invested with a Western International Securities broker or representative who unsuitably recommended you purchase risky complex or alternative products such as REITs, especially if they also unsuitably recommended you sell an existing investment such as variable annuities to finance the purchase, and these questionable transactions have resulted in damages such as excessive fees, sales charges, commission payments, and outright losses due to the products' poor performance, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.

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