A FINRA arbitration panel has ordered a former registered representative and his brokerage firm to pay $4.2 million to a group of retirees who were sold unsuitable nontraded real estate investment trust (REIT) shares. The award, handed down in April 2026, underscores the growing volume of claims against advisors who pitched illiquid alternative investments to conservative investors.
What the arbitrators found
The claimants, all aged 68 to 79, alleged that their broker concentrated more than 60 percent of their liquid assets in nontraded REITs issued by a sponsor that later collapsed. The investments were illiquid, carried high upfront fees, and generated no income for the investors. The broker earned commissions of 7 percent on each sale.
The arbitration panel concluded that the broker violated FINRA Rule 2111, the suitability standard, by recommending investments that were inconsistent with the clients’ stated objectives of capital preservation and income generation. The panel also found that the brokerage firm failed to supervise the broker’s activity, despite multiple red flags in his production reports.
The rise in nontraded REIT claims
Nontraded REITs have become one of the largest sources of investor losses in FINRA arbitration. These products are not listed on public exchanges, making them difficult to sell if an investor needs liquidity. They often charge upfront fees of 10 to 15 percent, eroding returns before a single distribution is made.
According to FINRA Dispute Resolution Services, claims involving alternative investments, including nontraded REITs, rose by 34 percent in the first quarter of 2026 compared to the same period last year. Many of these cases involve elderly investors who were told the products were safe and like bonds.
| Year | Alternative Investment Claims Filed | Percent Involving Retirees |
|---|---|---|
| 2023 | 1,847 | 41% |
| 2024 | 2,103 | 46% |
| 2025 | 2,389 | 51% |
| 2026 Q1 | 712 | 53% |
Why elderly investors are especially at risk
Elderly investors are disproportionately targeted in nontraded REIT sales because they often have substantial retirement savings and are seeking income. Brokers who push these products frequently use fear-based pitches, warning clients that traditional bonds will not keep pace with inflation.
What the pitch rarely includes is a full disclosure of the illiquidity risk, the high fee structure, and the fact that many nontraded REIT sponsors have defaulted on their distributions within the first three years of operation.
What investors should watch for
Investors who are approached with nontraded REIT offerings should ask three questions before signing anything. First, what is the total fee load, including sponsor fees, selling commissions, and dealer-manager fees. Second, how long is the hold period, and what are the early redemption penalties. Third, what is the experience and track record of the sponsor in prior offerings.
Any advisor who resists answering these questions in writing is waving a red flag that should not be ignored.
Haselkorn & Thibaut fights for investor recovery
We have seen this pattern before. For more than 95 years, the securities attorneys at Haselkorn & Thibaut have represented investors who were sold unsuitable nontraded REITs, variable annuities, and other complex products. Our founding partners are former Wall Street defense attorneys, and we use that insider knowledge to hold firms accountable.
We have recovered over $520 million for investors, and we maintain a 98 percent success rate in the cases we accept. We are rated AV Preeminent by Martindale-Hubbell and hold a 5.0-star client review rating. We accept cases on a contingency basis. If we do not recover money for you, you do not pay us a fee.
Contact Haselkorn & Thibaut today
If you or a family member lost money in a nontraded REIT, variable annuity, or other alternative investment, time matters. Arbitration claims are subject to filing deadlines, and evidence can disappear if you wait.
Call us today for a free consultation. We will review your account statements, explain your legal options, and give you an honest assessment of your case. We have offices in Florida, New York, Arizona, Texas, and North Carolina, and we represent investors nationwide.
- Main Phone: 1-888-885-7162
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Haselkorn & Thibaut: Former Wall Street defense attorneys fighting for Main Street investors.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Past results do not guarantee future outcomes. Contact a qualified securities attorney to discuss the specific facts of your case.
