A Closer Look at the Case Against Roots Real Estate Investment Community I, LLC
In April 2024, I found myself reading through a Consent Order issued by the Texas State Securities Board (TSSB). It was against Roots Real Estate Investment Community I, LLC, a company originating from Atlanta, Georgia, involved in investing and managing a diversified portfolio of residential properties. The TSSB reprimanded the company and slapped them with a $17,500 fine for making sales to a total of 266 Texas residents without the required licensing.
As per the TSSB, the total sales amounted to close to $900,000 that took place from September 2022 through January 2024. Essentially, Roots Real Estate Investment Community had conducted the sales while not registered with the Texas Securities Commissioner as a dealer – a clear violation of Sections 4004.051, 4007.105(a)(13)(A), and 4007.106 (a)(3) of the Texas Securities Act.
This news gives rise to questions about the severity of such allegations and, more importantly, their impact on investors. Here’s more on that:
– Violation of the law: As I unpacked the details of the consent order, it was evident that the company’s actions violated the rulebook. Riding roughshod over the prescribed sections of the Texas Securities Act is a serious matter.
– Investor confidence: In the grand scheme of things, such incidents shake the faith of investors and deter them from making potential investments, contributing to a drop in confidence levels.
Examining the Role of Financial Advisors and Broker-Dealers
In the process of unravelling legal and financial complexities, it’s crucial to understand the role financial advisors and broker-dealers play. The Financial Industry Regulatory Authority (FINRA) is the watchdog that licenses and puts regulatory checks on stockbrokers and brokerage firms.
Tracking the background of financial advisors and their past complaints is a part of its mandate. It also requires these brokers and firms to report any customer complaints or disputes, as well as regulatory sanctions. Moreover, brokers must disclose any personal financial troubles like bankruptcies, judgments, and liens.
Take a moment and let me say this – “An investment in knowledge always pays the best interest” (Benjamin Franklin). So, the more you spend your time understanding the nuances of financial systems, the better decisions you’ll make.
Deciphering the FINRA Rule
Quite a mouthful, isn’t it? Breaking it down, the FINRA Rule refers to the stipulations set forth by the Financial Industry Regulatory Authority. It prescribes guidelines for the operation of financial advisors and broker-dealers, and how they should handle your financial resources. I emphasize, ensure that you’re working with a FINRA registered broker to avoid disappointments.
Consequences and Lessons Learned
The events that unfolded with Roots Real Estate Investment Community serve as a stark reminder of the unpredictability of the financial world. The repercussions can be far-reaching, from heavy fines and reputational damage to loss of consumer trust.
This situation validates an alarming statistic–according to The Economist, up to 7% of financial advisors have misconduct records. So, it’s crucial to do your due diligence in selecting a financial advisor. To avoid being caught in such scenarios, always validate an advisors’ FINRA CRM number before getting into business with them.
Understanding these complexities can sometimes be an uphill task. However, the reward lies in an increased sense of financial acumen and risk mitigation. As an investor, your goal should always focus on informed decision-making, and that comes with understanding the often intertwined worlds of finance and law.
DISCLAIMER: Always refer to the information made publicly available through the FINRA or TSSB websites to further investigate financial advisors and brokerages to confirm their registration and compliance details.
