Advisor Vows to Fight FINRA Charges of Inappropriate REIT Sales
The Financial Industry Regulatory Authority’s Department of Enforcement filed a disciplinary proceeding against Mark Sam Kolta, who, while associated with former FINRA member firm National Securities Corporation, allegedly made “unsuitable recommendations” to 16 clients to purchase more than $4.8 million in shares of American Realty Capital New York City REIT, which was then a non-traded real estate investment trust. Kolta blames the Nicholas Schorsch-owned company for the losses and vows to fight the charges brought by FINRA.
According to FINRA, from June 2014 through August 2015, Kolta’s recommendations caused his customers to lose more than $4.1 million, while he generated more than $290,000 in commissions.
FINRA claims that Kolta’s recommendations to these 16 customers to purchase the non-traded REIT shares were unsuitable in view of the customers’ investment profiles and the fact that his recommendations over-concentrated the customers’ investable assets and liquid net worth in illiquid and high-risk securities.
Supposedly, starting in September 2013 and continuing through August 2015, Kolta also caused these customers reported net worth, investable/liquid assets, and annual income on National’s customer account records, customer account record updates, and REIT investment documents to be falsified and dramatically inflated, as compared to these customers’ actual net worth, investable/liquid assets, and annual income. Kolta also often caused these customers’ reported investment objectives and risk tolerance, as well as these customers’ reported assets held away from National, to be inaccurate and falsified, according to FINRA.
Allegedly, between June 2014 and May 2015, Kolta also sent to more than 50 of his customers and other retail investors retail communication emails that were not fair and balanced and that contained misleading, unwarranted, and promissory statements and claims.
FINRA says Kolta also failed to obtain the required approval of a qualified principal of National prior to sending any of these retail communication emails.
When his time at National ended, Kolta joined Worden Capital Management until 2021; the firm was expelled by FINRA in 2022. He is no longer registered with FINRA and has multiple disclosures on his BrokerCheck page, including some $16.9 million in total settlements for alleged unsuitable investments. The claims were settled from 2019 to 2021, though some were denied, and others are still pending.
Kolta began his advisory career in 2008 with Merrill Lynch, Pierce, Fenner & Smith Inc. and remained there for three years before moving to Chase Investment Services Corp. until 2011. Kolta was then affiliated with Cetera Advisors LLC for a year, prior to joining National.
In an interview with Financial Advisor magazine, Kolta said he has “successfully fought and expunged several client complaints after demonstrating that his clients indeed understood the risk of their investments.”
He “laid much of the blame” for the lost money at the feet of both American Realty Capital and his ex-broker dealer, National Securities Corporation, which he said, “vetted the product with heavy documentation.”
Kolta also claimed to have lost $750,000 of his and his family’s own money in the fund.
“My $750,000 investment is about $25,000 today,” said Kolta. “That tells you how much I’ve been harmed. It’s not like I didn’t believe in the holding.”
As The DI Wire previously reported in July 2019, AR Capital was run by real estate manager and broker-dealer acquirer Nicholas S. Schorsch. The Securities and Exchange Commission charged AR Capital LLC, its founder Nicholas S. Schorsch, and its former CFO Brian Block with wrongfully obtaining millions of dollars in connection with two separate mergers between real estate investment trusts that were sponsored and externally managed by AR Capital, now known as AR Global. The charges were settled and included paying $60 million in disgorgement, prejudgment interest and civil penalties without admitting or denying the allegations in the complaint, which can be read here.
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