Phoenix American Hospitality: Securities Investigation

Have You Suffered Investment Losses in American Hospitality Properties Fund III, sponsored by Phoenix American Hospitality (PAH)?

The White Law Group is investigating potential FINRA lawsuits related to PAH funds and whether brokerage firms may have unsuitably recommended these private placement offerings to investors.

Understanding Phoenix American Hospitality

PAH is reportedly an opportunistic hotel fund manager, according to its website. The company reportedly purchases hotels in areas where anticipated new construction is complex due to high construction costs, top-tier franchises have already been identified, and future hotel zoning sites do not present competition.

The company filed a Form D to raise capital from investors with the offering of American Hospitality Properties Fund III in 2016. The total amount of the offering sold was purportedly $50,000,000. The sales commissions and fees were estimated at 10% of the offering amount.

According to public filings, these offerings are structured as private placements under Regulation D, exempting PAH from full SEC regulation. As a result, these investments are typically available to accredited investors. Additionally, these opportunities also usually come with limited liquidity and transparency.

Investments such as these are typically sold by brokerage firms, like Phoenix American Hospitality, in exchange for a large upfront commission. In this case, high fees usually hover around 7-10%. Often, additional “due diligence fees” appear that can range from 1% to 3%.

Unregistered Securities and Private Placements

The problem with private placement investments, such as American Hospitality Properties Fund III, is that they typically involve a high degree of risk. They are also often sold as unregistered securities, which lack the same regulatory oversight as more traditional investment products like stocks or bonds.

While not inherently illegal, unregistered securities are rarely suitable for inexperienced investors or those wanting to be conservative with their investments. Why? Investing in these types of securities often means delayed return potential and limited financial disclosures.

With Phoenix American Hospitality issuing Regulation D offerings, this situation places additional responsibilities on brokerage firms and advisors to conduct thorough due diligence and accurately explain all investment-related risks to their clients. Unfortunately, that doesn’t always happen.

Unscrupulous advisors and firms sometimes misrepresent complex products, such as the American Hospitality Properties Fund III or a similar investment, especially when targeting retirees or others with limited investing knowledge.

Did Your Broker Unsuitably Recommend a Phoenix American Hospitality Fund to You?

Under the SEC’s “Regulation Best Interest” standard, brokerage firms must conduct due diligence before recommending investments. If a financial advisor fails to assess risk suitability and investors suffer losses, they may have grounds for a complaint or lawsuit. This is particularly true when advisors or brokers place high-commission products in portfolios that don’t align with the portfolio owner’s goals.

If you were told that a Phoenix American Hospitality investment was “guaranteed” or “100% safe,” these can be misrepresentations that warrant legal scrutiny.

Lawsuit Options: FINRA Arbitration vs. Class Action

Investors considering legal action may wonder whether a class action lawsuit or an individual FINRA arbitration claim is the better option. Typically:

• FINRA Arbitration is often more suitable for investors with losses exceeding $100,000.
• Class Action Lawsuits are usually pursued when numerous investors have small claims that are impractical to litigate individually.

FINRA arbitration is a confidential process that doesn’t necessitate going to court. Additionally, this option can sometimes result in faster case resolutions and recovery for investors with legitimate claims. The White Law Group handles securities cases in FINRA arbitration and has successfully recovered millions of dollars for investors throughout the United States.

Get Your Free Consultation

Filing a Lawsuit for Losses in American Hospitality Properties Fund III

If you have concerns about your investment in Phoenix American Hospitality offerings, you may be able to recover losses through a FINRA arbitration claim. The White Law Group represents investors nationwide in securities arbitration cases.

Time is often an essential factor in cases involving potential investment fraud. Additionally, statutes of limitations may apply to these cases, limiting the time those affected have to act. If you suspect that Phoenix American Hospitality or another brokerage firm misled or misinformed you, seek out legal professionals immediately.

The White Law Group is currently investigating whether brokerage firms fulfilled their fiduciary duty and whether advisors who recommended Phoenix American Hospitality funds did so based on a reasonable basis of suitability.

For a free consultation, call 888-637-5510 to discuss your legal options with an experienced securities fraud attorney.

About The White Law Group

The White Law Group is a national securities fraud and investor protection law firm with offices in Chicago, Illinois, and Seattle, Washington. The firm represents investors in claims against brokerage firms through FINRA arbitration. Visit our homepage to learn more about investor recovery options. Click the button below for a free consultation with The White Law Group.

Frequently Asked Questions

What are examples of unregistered securities?

These types of securities can include hedge funds, private placement investments, non-traded REITs, and other Regulation D offerings. Securities that aren’t registered typically mean they’re exempt from SEC registration and sold exclusively to accredited investors.

Are hospitality funds illegal?

No, the hospitality funds like those offered by Phoenix American Hospitality aren’t inherently illegal. However, legal problems can arise when such investments are misrepresented or otherwise sold without proper due diligence.

What are the Form D requirements?

Form D is a type of filing submitted to the SEC by companies that issue securities under a Regulation D exemption. When completed, this form provides basic information, including the size of the offering, the identity of executive officers, and the intended use of proceeds. However, a Form D does not require detailed financial information from the applicant.