The Law Firm of Vernon Litigation Group and the Law Office of Eric Norstedt, P.A. filed today an arbitration claim against NFP Securities, Inc. and WFG Investments, Inc. for the inappropriate recommendation and sale of multiple illiquid and risky investments to a retired investor. Two of the investments at issue include the Icon Leasing Fund Eleven, LLC and the Icon Leasing Fund Twelve, LLC.
According to the Claim filed in FINRA arbitration today, the advisor, registered with NFP Securities and subsequently with WFG investments, approached a retired Arkansas woman to invest a considerable portion of her liquid net worth (and primary source of income) into a number of illiquid investments, including the Icon Leasing Fund Eleven, LLC and the Icon Leasing Fund Twelve, LLC. The Claim states that the NFP/WFG advisor led the retired investor to believe that the investments involved little risk and that she would receive a very healthy annual dividend in excess of 9 percent. Finally, the Claim states that the investor was also led to believe that she would receive all of her principal back when the Icon investments concluded approximately seven years later.
According to the Claim, what was not adequately explained to the retired investor is that the Icon Eleven and Icon Twelve investments are Funds that operate as an equipment leasing program in which the capital invested is pooled together to acquire equipment subject to a lease and, to a lesser degree, acquire ownership rights to items of leased equipment at lease expiration. As a result, the investment in the Icon Funds not only involved a great amount of risk, but it was also illiquid with little or no secondary market to sell the shares. Moreover, contrary to what was explained to the retired investor, the dividends that the investments would produce could not be predicted as they depended on profit derived from the equipment leases, the Claim states.
Although the Icon Eleven and Icon Twelve investments began paying healthy distributions during the “offering period” (i.e., while the Funds continued to be offered to new investors), soon after the Funds closed to new investors, the dividends became erratic and the value of the investment began to rapidly decline. Consequently, the decline in share value for both Icon investments caused the retired investor severe losses.
Both Icon products were sold by the NFP/WFG advisor at a price of $1,000 per share. Nevertheless, according to documents filed with the SEC, as of December 31, 2012, Icon Leasing Fund Twelve disclosed that the estimated value per share had declined to approximately $469.15. This signifies a loss in value of over 53 percent of the investor’s initial investment. Additionally, Icon Leasing Fund Twelve reported in its latest quarterly report (also filed with the SEC) that its current liabilities now exceed the number of its current assets. This could translate into further significant losses to investors.
The financial situation of Icon Leasing Fund Eleven is even more troubling. SEC documents reveal that as of December 31, 2012, the estimated value per share of this Fund was deemed to be $159.31. This represents a decline in the value of the shares of over 84 percent (when compared to the original price per share of $1,000).
“It is evident that NFP Securities and WFG Investments failed to warn and provide investors with a fair and balanced assessment of the Icon investments,” said Chris Vernon, a securities fraud lawyer and founding partner of Vernon Litigation Group. According to Eric Norstedt, also a securities fraud lawyer, NFP Securities, and WFG Investments supervision and compliance practices appear to be negligent in this case. “These institutions’ failure to perform appropriate supervision over their own advisors is not only troubling but also one of the determining factors that caused our client (as well as other investors) tremendous losses.”
According to an investigation conducted by the attorneys, it appears that the Icon investments gave advisors (and their firms) some of the largest commissions of any alternative products out there. Specifically, according to information filed with the SEC, Icon Leasing Fund Eleven and Icon Leasing Fund Twelve only allocated approximately 81 percent of the investor’s overall investment in the purchase of actual equipment. The SEC filings display that a disproportionate 18 percent of the investor’s overall investment went to pay commissions, fees, and expenses (approximately 8 percent of this 19 percent went to pay commissions for NFP and WFG).
Finally, the Claim filed today—asking for compensatory damages in excess of $225,000—alleges that both NFP and WFG failed to perform adequate due diligence as to the alternative investments sold to the retired investor (including the Icon investments). For example, SEC filings reveal that the Icon Funds reserved the right to purchase shares for its officers and affiliates at a discounted price, which in turn generated higher returns for Icon related entities while diluting the investor’s share value.
The lawyers at Vernon Litigation Group and the Law Office of Eric Norstedt continue to represent investors across the country who have suffered considerable losses from alternative investments such as the Icon Leasing Fund Ten, Icon Leasing Fund Eleven, and Icon Leasing Fund Twelve. If you are concerned about your investments with NFP Securities and WFG Investments, or the circumstances under which any of the investments were offered and sold to you by any other financial institution, please call toll free either Eric Norstedt, P.A. at (239) 319-4434 or Vernon Litigation Group toll-free at (239) 319-4434 or by e-mail at mailto:info@vernonlitigation.com.