Cetera and East West Bank Lawsuits Investigation

Cetera and East West Bank may be placing investors in risky private placement investments

Our securities lawyers are investigating whether investors were improperly directed into private placements by financial advisors at East West Bank and Cetera Investment Services, LLC. The partnership between these two companies has reportedly resulted in many East West Bank customers being placed into unsuitable and risky investments such as Hospitality Investors Trust, Northstar Healthcare, and Arc Realty Finance. On September 26, 2019, the SEC fined Cetera for failing to adequately disclose its financial relationships with banks for referring clients.

If you invested in REITs or other private placements through an investment advisor at East West Bank or Cetera, contact our securities team. We may be able to help you recover your losses.

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Cetera Steers Conservative Investors into Risky Private Placement REITs

Investors report that Cetera advisors working with East West Bank may have over-concentrated clients’ accounts by advising investors to place all of their money in one single private placement or real estate investment trust (REIT). Investment over-concentration is dangerous because it places investors at excessive risk of loss due to a market downturn in a specific sector or type of investment.

Financial advisor negligence is not uncommon, and can often result in substantial losses on behalf of the investor.

Another form of negligence and misconduct is placing clients in unsuitable investments. Good financial advisors and stock brokers should evaluate an investor’s age, risk tolerance, investments goals, and experience when recommending investments to their clients. Some advisors, however, have been known to steer clients looking for conservative investments into risky investments because they pay high commissions.

If you were looking for a conservative or low-risk investment, and placed into a private placement, REIT, or other type of risky investment by your financial advisor, you may be eligible for monetary recovery. Contact our attorney team to learn more about your options.

The Risks of Private Placement REITs

There are many dangers associated with private placements and other non-traded REITs. Advisors often recommend risky private placements to investors because these investments pay high commissions.

While financial advisors often sell REITs as low-risk, high yield investments, FINRA and the SEC have increased scrutiny into the marketing of these investments. Private placement REITs are not traded on the public securities exchange, meaning that these REITs can often be illiquid. Many investors in REITs, such as Northstar Healthcare and Hospitality Investors Trust, report being unable to redeem their shares from these non-traded REITs and remain stuck in uncertain investments as a result.

In addition to being illiquid, meaning investors’ money is locked in for a period of time, these investments can often be extremely risky. Many of these are issued by start-ups with limited track-records. The true value of these investments is not publicly available, and there are limited disclosures pertaining to the finances of the private placements.

If your advisor sold you a private placement or REIT, and failed to mention the risks associated with this placement, you may have a claim. Speak with an attorney about recovering your losses.

East West Bank and Cetera Signed Partnership Agreement

In March of 2013 Cetera Investment Services, LLC and East West Bank signed a partnership agreement. This agreement allowed Cetera to “provide comprehensive wealth management solutions and support” to East West Bank’s clients across six-state branch networks.

East West Bank

East West Bancorp operates in over 130 locations worldwide, including many markets in the United States and Greater China.

Cetera Investment Services

Cetera Investment Services, LLC, also known as Cetera Financial Institutions, is a registered broker-dealer that works exclusively with banks and credit unions. In 2013, Cetera worked with nearly 500 financial institutions in the United States. East West Bank was the third financial institution with total assets exceeding $20 billion to sign with Cetera Investment Services within a six month period.

If you invested with a Cetera advisor through East West Bank, or any other financial institution, you may have a claim against your advisor. Get a free case evaluation today.

Cetera Fined by SEC; Issued Cease & Desist Order

On September 26, 2019, the Securities and Exchange Commission (SEC) issued an order instituting administrative and cease-and-desist proceedings against Cetera Investment Advisers LLC for violation of the Investment Advisers Act of 1940.

The order alleges that Cetera violated the “Solicitor Rule,” which requires that if an investment advisor pays a solicitor a cash fee for solicitation activities, the solicitor must provide the client with a written disclosure outlining this relationship and the compensation provided.

The order states that Cetera has paid cash fees to about 350 banks since January of 2007 to solicit clients on their behalf. But Cetera was not informing their clients of the relationship between Cetera and the bank, or how much Cetera was compensating the bank for soliciting clients. According to the order:

Cetera’s clients were not informed of the extent of the banks’ financial interest in the clients’ choice of Cetera as an investment adviser and did not have all of the information that would enable them to evaluate the solicitor’s recommendation.

This means that many clients may have been placed with Cetera advisors based on the recommendation of their banks, without fully understanding that Cetera was paying the banks for this solicitation. Therefore, Cetera was able to benefit off of these solicited clients. The order points out:

Between January 2013 and March 2017, Cetera generated more than $56 million in advisory fees through its bank networking agreements and shared the vast majority of that compensation with the banks.

The SEC ordered Cetera to cease and desist from committing any further violations, and fined the company a civil money penalty of $185,000.

If your bank placed you with a Cetera financial advisor without a written disclosure about its relationship with Cetera, you may have a legal claim. You may be eligible to recover your investment losses.

Our REIT Lawsuit Investigations

Gibbs Law Group is currently investigating a number of REITs on behalf of shareholders. These REITs include:

If you invested in any of these REITs, or others, we may be able to help. Speak with a lawyer to learn more.

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Our securities lawyers have recovered over a billion dollars on behalf of our clients against behemoths, such as Chase Bank, Mastercard, and Anthem Blue Cross Blue Shield. Read more about our results.


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