FINRA Arbitration Panel Awards $509,000 in Suit Over Conservation Easement Investments
From the desk of Jim Eccleston at Eccleston Law
InvestmentNews reports that a three-person arbitration panel under the aegis of Financial Industry Regulatory Authority (FINRA) Dispute Resolution Services awarded $509,000 in damages to clients of Strategic Financial Alliance Inc. in a dispute involving syndicated conservation easements and other investment recommendations.
The claimants, who filed the arbitration proceeding in 2023, alleged that Strategic Financial Alliance made unsuitable investment recommendations. According to the FINRA arbitration award, the claims involved recommendations for whole life insurance policies, illiquid real estate investment trusts, and syndicated conservation easements.
The award could mark the first FINRA arbitration decision involving syndicated conservation easements. A review of FINRA's arbitration database found no prior final decisions using the term "land easement."
Syndicated conservation easements have drawn regulatory scrutiny because of concerns over potentially abusive tax shelters. InvestmentNews reports in 2017 that the IRS had been examining these transactions, which can offer investors charitable contribution deductions several times greater than their original investment.
For example, certain deals have allowed investors to claim deductions equal to four or four-and-a-half times their investment. The IRS has questioned property appraisals and valuations associated with these transactions.
These arrangements typically involve high-risk private placements and often reach investors through smaller independent broker-dealers. InvestmentNews previously reported that major banks generally did not sell syndicated conservation easements. Instead, smaller securities firms and independent brokers promoted the investments, sometimes working with accountants, attorneys, and tax preparers to reach high-net-worth investors.
The arbitration award adds to the scrutiny surrounding the sale of these investments through the independent broker-dealer channel.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
Tags: eccleston, eccleston law, finra arbitration, conservation easements, securities litigation, strategic financial alliance, broker misconduct
