• June 14, 2023
• FNEX Capital, LLC

Chay Lapin (CRD#: 6275140) is a registered Broker at FNEX Capital, LLC in Indianapolis, IN.

Broker’s Background

He entered the securities industry in 2014 and previously worked for Growth Capital Services, Inc.; Wealthforge Securities, LLC; Colorado Financial Service Corporation; and Concorde Investment Services, LLC.

Current And Past Allegations Of Conduct Leading To Investment Loss

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), in April 2023, a customer dispute was filed against Chay Lapin. The allegation states, “Respondents failed to conduct a reasonable due diligence on NP Skyloft DST, misrepresented this investment and failed to disclose material facts concerning this investment to claimants.” The customer dispute is pending.

In addition, Chay Lapin has been the subject of six customer complaints, including five that remain pending, including the following:

• April 2023 — “Respondents failed to conduct a reasonable due diligence on NP Skyloft DST, misrepresented this investment and failed to disclose material facts concerning this investment to claimants.” The customer dispute is pending.
• March 2023 — “Respondents failed to conduct a reasonable due diligence on NP Skyloft DST, misrepresented this investment and failed to disclose material facts concerning this investment to claimants.” The customer dispute is pending.
• February 2023 — “Respondents failed to conduct a reasonable due diligence on NP Skyloft DST, misrepresented this investment and failed to disclose material facts concerning this investment to claimants.” The customer dispute is pending.
• January 2023 — “Respondents failed to conduct a reasonable due diligence on NP Skyloft DST, misrepresented this investment and failed to disclose material facts concerning this investment to claimants.” The customer dispute is pending.
• January 2023 — “Respondents improperly recommended, supervised the recommendation of, and controlled the recommendation that claimants invest in NP Skyloft, DST. Respondents failed to conduct a reasonable due diligence on NP Skyloft, DST, failed to disclose material facts to claimants concerning this investment, and misrepresented material facts to claimants concerning this investment.” The customer dispute is pending.
• November 2019 — “Investor alleges that his investments into two private placements are not performing as he anticipated. Investor further alleges his funds are locked out of his control. The representative started the relationship with this investor around May 2016.” The customer dispute was denied.

For a copy of Chay Lapin’s FINRA BrokerCheck, click here.

The NP Skyloft DST

A DST is a legally recognized trust that is created for a specific business purpose.  Traditionally, DSTs are utilized to provide a governing agreement by which real estate can be purchased, held, managed and administered among a pool of investors who own participation interests in the DST.  The DST allows an investor the opportunity to own an interest in the underlying real estate without the responsibility of managing the property.  A trustee is appointed to manage the property on behalf of the investor pool.  A Tenant-in-Common or TIC investment offering is similar to a DST in that both investment vehicles pool investor capital toward the purchase of underlying real estate but the legal ownership structure is different.  DST and TIC investments are commonly used as a mechanism through which real estate owners can facilitate a 1031 exchange, which refers to a section of the Internal Revenue Code that allows a seller of real estate to defer paying capital gains taxes if the sale proceeds are reinvested in qualified real estate within a designated period of time.

DSTs and other private placements have increased in popularity over the years as investment professionals attempt to capitalize on volatility experienced among publicly trades securities.  Private placements, such as DSTs, are often marketed and sold as safe and stable income producing vehicles that are not subject to the same market forces as publicly traded securities.  While there is some level of truth to that statement, the reality is that private placements are speculative and do not have the same reporting requirements as publicly traded securities.  This means that DSTs can often mask financial difficulties until it is too late.  Moreover, because DSTs are illiquid, investors are often unable to sell their interests to third-parties before experiencing an investment loss.

According to SEC filings, the Nelson Partners Skyloft DST raised more than $75 million from investors in order to fund its luxury student housing facility in Austin, TX.  Student housing DSTs are popular because of the perception of high occupancy rates.  In order to finance certain aspects of this transaction, a $35 million loan was secured from Axonic Capital.  When Nelson Partners Skyloft DST defaulted on that loan, the underlying property was sold.  This has had a devastating impact on investors because they no longer have a viable interest in the underlying property.  As is often the case with DSTs, individual investors do not have control of individual decisions made by the DST structure and, accordingly, rely on their financial professionals to recommend DSTs with seasoned, professional managers, that have undergone an extraordinary due diligence process.

We Help Investors Recover Investment Losses

Financial advisors have a legal and regulatory obligation to recommend only suitable investments that are appropriate for their clients’ needs and objectives. Their employing brokerage firm has a legal and regulatory obligation to supervise the Financial Advisors’ sales practices and dealings with clients. To the extent any of these duties are breached, the customer may be entitled to a recovery of his or her investment losses.

Reasonable basis suitability requires that a recommended investment or investment strategy be suitable or appropriate for at least some investors. Reasonable basis suitability requires an advisor to conduct adequate due diligence so that he or she can determine the risks and rewards of the investment or investment strategy.

Quantitative suitability requires a brokerage firm or financial advisor with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions – even if suitable when viewed in isolation – is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile. No single test defines excessive activity, but factors such as the turnover rate, the cost-equity ratio, and the use of in-and-out trading in a customer’s account may provide a basis for a finding that a member or associated person has violated the quantitative suitability obligation.

Customer-specific suitability requires that a member or associated person have a reasonable basis to believe that the recommendation is suitable for a particular customer based on that customer’s investment profile. Among the criteria that a financial advisor must evaluate to satisfy his or her customer-specific suitability obligations include the investor’s age, tax status, time horizon, liquidity needs, and risk tolerance; a client’s other investments, financial situation and needs, investment objectives, and any other information disclosed by the customer should also be considered.

The Wolper Law Firm represents investors nationwide in securities litigation and arbitration on a contingency fee basis. Matt Wolper, the Managing Principal of the Wolper Law Firm, is a trial lawyer who has handled hundreds of securities cases during his career involving a wide range of products, strategies and securities. Prior to representing investors, he was a partner with a national law firm, where he represented some of the largest banks and brokerage firms in the world in securities matters. We can be reached at (800) 931-8452 or by email at mwolper@wolperlawfirm.com.