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FINRA Files Enforcement Action Against Southeast Investments Broker, Mercer Hicks III, For The Sale Of Non-Traded Real Estate Investment Trusts

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Mercer Hicks III (CRD # 245170) is a Financial Advisor at Southeast Investments in Pinehurst, North Carolina. Mercer Hicks III has been in the securities industry since 1972 and previously worked at Capital Investment Group and Cantella & Co.

According to publicly available records released by the Financial Industry Regulatory Authority (FINRA), on July 1, 2019, FINRA made a preliminary determination to recommend disciplinary action against Mercer Hicks III for the alleged unlawful recommendation of non-traded real estate investment trusts (“Non-Traded REITs”).

On December 20, 2019, FINRA followed through and filed an enforcement action against Mercer Hicks III, alleging:

“Hicks made unsuitable recommendations to five senior customers (three of whom were widows) to purchase speculative non-traded real estate investment trusts (“REITs”) and non-traded business development companies (“BDCs”). In addition, Hicks failed to conduct reasonable due diligence on the REITs and BDCs and failed to understand the risks and features associated with those investments before recommending them to his customers… In the aggregate, Hicks recommended 18 purchases of unsuitable non-traded REITs and non-traded BDCs to the five senior customers totaling approximately $665,000. Hicks received a seven percent commission from each sale, totaling approximately $46,550.”

For a copy of the FINRA complaint, click https://www.finra.org/sites/default/files/fda_documents/2017052867301%20Mercer%20Hicks%20III%20CRD%20245170%20Complaint%20sl.pdf

Non-traded REITs do not trade a public securities exchange. For this reason, non-traded REITs can be illiquid, meaning investors may be unable to sell their investments on demand. Typically, the commissions generated on non-traded REITs are higher than industry norm and may be subject to extreme volatility due to associated risk factors. Non-traded REITs are only suitable for investors with a long-term investment horizon who are willing to accept higher levels of risk in their investments.

Financial Advisors often sell non-traded REITs because the commission available is higher than traditional investment products like stocks and bonds. Financial Advisors often do not adequately explain the risk factors of non-traded REITs and the investors inability to sell their investment upon demand (i.e., illiquidity).

In addition, Mercer Hicks III has two employment disclosures reflected on his CRD. In 2014, he was discharged by Capital Investment Group for allegedly “misrepresenting himself as a client in dealing with an insurance company.” In 2009, he was “permitted to resign” from Cantella & Co. for allegedly initialing client forms himself instead of having the execute the required paperwork.

For a copy of Mercer Hicks’ CRD, click https://brokercheck.finra.org/individual/summary/245170#disclosuresSection

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.

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.

Attorney Matthew Wolper

Attorney Matthew WolperMatt Wolper is a trial lawyer who focuses exclusively on securities litigation and arbitration. Mr. Wolper has handled hundreds of securities matters nationwide before the Financial Industry Regulatory Authority (FINRA), American Arbitration Association (“AAA”), JAMS, and in state and federal court. Mr. Wolper has handled and tried cases involving complex financial products and strategies ranging from traditional stocks and bonds to options, margin and other securities-based lending products, closed/open-end mutual funds, structured products, hedge funds, and penny stocks. [Attorney Bio]