While discussing Mackenzie Realty Capital’s recent financial decisions, I’m reminded of the famous quote by Warren Buffet, “Only when the tide goes out do you discover who’s been swimming naked.” Investors are now suspicious of Mackenzie Realty Capital Inc., a publicly registered non-traded real estate investment trust with multimillion-dollar property holdings across the U.S — apartment buildings and prime office spaces. Given its abrupt termination of dividends reinvestment and share buyback programs, coupled with the pursuit of ordinary stock listing on OTCQX, the investors are left in the dark, scratching their heads about the company’s real position.
Understanding the Severity of the Allegations and the Implications of Investors
The abrupt cessation of essential programs like reinvesting dividends and buying back shares poses grave concerns about the company’s stability. A company’s repurchase of outstanding shares or share buyback can be seen as a robust financial strategy as it bolsters investor confidence by showing that the company has faith in its own future.
However, Mackenzie Realty Capital’s recent decision to suddenly halt these programs hints at internal financial instability, made worse by the lack of clear communication to the investors. To pack an extra punch, the company’s shares perform poorly than when they were first sold. Evidencing dwindling investor confidence, these critical financial indicators paint a bleak picture.
Background of the Financial Advisors, Broker Dealer, and Their Complaints
Often, investment advisories and broker-dealers play a critical role in guiding investors. Armed with expert knowledge and foresight, they ensure that their clients’ investments align with their financial goals and risk appetite. Surprisingly, in the case of Mackenzie Realty Capital, the guidance seemed to have blatantly faltered.
FINRA’s BrokerCheck (hyperlink to the advisor’s FINRA CRM number) shows that the broker-dealer that sold these investments might have provided inadequate advice, considering the patrons’ financial status and risk tolerance. Shockingly, one in every 13 investors falls prey to bad financial advisors each year.
A Simple Explanation of the FINRA Rule
Akin to the above situation, the Financial Industry Regulatory Authority (FINRA) rules, primarily Rule 2111 on suitability, mandate brokers and advisors to recommend investment strategies consistent with the financial needs and risk appetite of the investors. This implies that the financial advisors and securities brokers must step into the investor’s shoes and empathize with them to understand their financial goals, risk capability, and tax status. If they fail to do so and mis-sell, they might be held accountable for compensating the investors for their losses.
The Consequences and Lessons Learned
Mackenzie Realty Capital’s investors, who incurred heavy losses, might find a silver lining under FINRA’s regulations. They could argue their case through FINRA arbitration or other avenues. While it’s a complex and challenging road to tread, it might help them recoup some of their lost investment.
Coming out of this fiasco, investors need to be extra cautious while choosing their financial advisors and broker-dealers. A thorough background check of their past records can help them make informed decisions. After all, Benjamin Franklin rightly said, “An investment in knowledge pays the best interest.”
At the end of the day, as much as an investment is about risks and rewards, it’s also about trust and integrity. While Mackenzie Realty Capital’s recent developments are unfortunate, they remind us that transparency, regular communication, and wise counseling are the pillars of successful investing and thriving investor relationships.
