Eric Drewes is a financial advisor registered with American Capital Partners, LLC, in Jacksonville, Florida. The broker-dealer markets itself as a “personal wealth management” firm that helps clients prioritize objectives and prepare financially to accomplish them, including retirement income and financial planning, and other financial goals.
Eric Drewes Investigation
Mr. Drewes is a Managing Director and co-head of Wealth Management and other departments with American Capital Partners, LLC. Mr. Drewes has served as a financial advisor, branch manager, office of supervisory jurisdiction manager, vice president, and managing director throughout his career.
According to the Financial Regulatory Authority (FINRA) BrokerCheck (as of May 2020), Mr. Drewes has been the subject of 3 disclosures:
In 2008, a customer dispute disclosure alleges a failure to supervise and unauthorized and excessive trading. The matter was settled. In late 2014, there was a customer dispute alleging unsuitability and churning, and that matter was settled. More recently, in April 2020, there is a customer dispute alleging failure to adequately conduct due diligence related to a real estate investment trust (REIT) security. This matter remains pending.
Problems Related to Non-Traded REITs – American Capital Partners
Many investors do not know that financial advisors have both a legal and regulatory duty to recommend/advise only investments that are appropriate for their clients. In addition, their investment firm has a legal and regulatory responsibility to supervise the investment-related activities of its financial advisor, including investment sales practices.
We are seeing a dangerous trend of private placement alternative investment securities that are being sold to regular investors. One of the biggest problems is that these non-traded REITs do not trade like other investments on regular exchanges. As a result, these types of investments are usually illiquid, meaning investors can’t quickly sell the investments. In addition, the investment product pricing is not open and transparent like stocks, so they typically have to be sold on secondary markets for pennies on the dollars.
Stockbroker and financial advisors often promote these types of products to clients because they pay a very high commission and often promise high-income streams to clients. Sadly investors are unaware of these issues until they try and sell them.
For Investors – important disclosures regarding non-traded REIT investments should include the following risks:
- Was it properly distinguished from bonds or CDs or other fixed-income investments?
- Were possible unanticipated tax consequences disclosed?
- Were the strict rules regarding limited opportunity for redemptions, as well as all fees charged for redeeming early, or the limitations you might face in trying to liquidate all fully disclosed?
- Were the high commissions along with issuer costs as well as the financial advisor and broker-dealer firm incentives for selling that product to you fully disclosed?
- How reliable was the track record of the underlying investment(s) and what was disclosed regarding the sponsor, manager, and underlying business(es)?
- What was disclosed regarding the investment product, and what alternative choices might be available for making a similar strategic investment that might be more diversified or fully liquid?
- Were the risks of concentration in any individual position, any particular product, geographic region, asset, market, sector, etc. disclosed?
- Did the investment strategy involve several investments that were correlated? Are too many eggs in one basket?
- Did you understand the material risks of the individual investments as well as the overall investment strategy?
- What was disclosed regarding the potential liquidity risk?