FINRA Fines and Suspends Adviser for Improper Non-Traded REIT Sale

The Financial Industry Regulatory Authority fined and suspended Elba M. Nogueras for Regulation Best Interest violations related to a non-traded real estate investment trust.

FINRA says that in September 2020, Nogueras recommended that her customer, a 52-year-old resident of Puerto Rico, invest in a non-traded REIT.

The prospectus cautioned that investments in the non-traded REIT involved a high degree of risk and could have resulted in a complete loss of principal. In addition, the non-traded REIT was illiquid, and investors had only limited opportunities, at the issuer’s discretion, to redeem their shares. As such, based on guidelines from the Commonwealth of Puerto Rico’s Office of the Commissioner of Financial Institutions, the REIT’s issuer included in the prospectus a prohibition on investments by Puerto Rico residents that exceed 10% of the investor’s liquid net worth.

Based upon Nogueras’s recommendation, her customer invested $81,000, which represented 81% of the customer’s liquid net worth, in the non-traded REIT, resulting in Nogueras earning a commission of $5,670.

According to FINRA, given the risk and illiquidity of investments in the non-traded REIT, Nogueras lacked a reasonable basis to believe her recommendation that her customer invest 81% of his liquid net worth in the non-traded REIT was in the best interest of the customer, who had a moderate risk tolerance and limited investment experience.

Therefore, Nogueras violated FINRA rules. She consented to a four-month suspension from associating with any FINRA member in all capacities, a $5,000 fine and disgorgement of $5,670 plus interest.

At the time of the FINRA violations, Nogueras was affiliated with First Southern LLC and has worked with four other firms. She has settled at least 15 customer disputes since she became an adviser in 2002.

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