An investor arbitration award involving tenant-in-common exchanges (TICs) may have been the final blow for broker/dealer Pacific West Securities. On March 6, a three-person arbitration panel of the Financial Industry Regulatory Authority (FINRA) awarded $2.1 million to a former client of a broker – William Swayne II – affiliated with the firm.
Pacific West announced in December that it planned to close its doors this month and that it had begun a recruiting effort to move the company’s brokers to Multi-Financial Securities Corp. According to the Broker Check Web site, however, Pacific West has yet to file the necessary paperwork to close or withdraw from the securities industry.
As reported March 13 by Investment News, the recent FINRA award against Pacific West Securities involves claimants Joseph and Marilyn Lightfoot, who allege that their TIC investments were not suitable for them “given their age, financial condition, cash flow needs, risk tolerance, over concentration in real estate and for other reasons.”
Included in the award was $200,000 in legal fees and interest.
The lack of suitability of the TICs was highlighted in the arbitration panel’s decision.
“Among other evidence of a violation of a standard of care under the Securities Act of Washington was the disavowal by [Pacific West and its broker, William Swayne II] of any obligation to conduct a suitability analysis for the sale of TICs in the circumstances of a Section 1031 – like-kind-assets exchange for tax deferral purposes,” according to the award. The arbitrators “determined that the sale of these securities to [the Lightfoots] violated the duty of reasonable care.”