William Schumann Allegedly Misrepresented REITs and BDCs

William Schumann (CRD #: 1604894), a broker registered with Grove Point Investments, allegedly misrepresented certain investments, according to his BrokerCheck record, accessed on March 9, 2023. Investors may have also worked with him through Grove Point Advisors. Keep reading to learn more about his alleged conduct as a broker.

Investor Disputes

On December 7, 2022, an investor alleged that William Schumann misrepresented the fee structure and liquidity of investments in non-traded real estate investment trusts (REITs) and Business Develop Companies (BDCs).

The client further alleged that these investments performed poorly between October 2014 and November 2022. They sought $160,000 in damages but the firm denied the dispute.

However, investors should be aware that firms can deny disputes without an external review. Investors can still seek out FINRA arbitration after a denial and may be able to recover their losses.

On February 8, 2019, an investor filed a dispute naming William Schumann in allegations of failure to supervise, unsuitable recommendations of alternative investments, and failure to conduct due diligence from approximately October 2010 to December 2014. The client sought $100,000 in damages and received a settlement of $87,500.

FINRA Rule 2020

FINRA Rule 2020 bans the use of manipulative, deceptive, or otherwise fraudulent tactics to influence investors’ decisions. Misrepresenting an investment’s limitations, requirements, or other relevant information violates this rule.

FINRA Rule 3110

FINRA Rule 3110 requires that firms establish supervisory systems to ensure their compliance with securities regulations. Among other things, firms must appoint supervisors and ensure that they have the appropriate training or experience for their roles.

FINRA Rule 2111 and Regulation Best Interest

FINRA Rule 2111 requires brokers to take into account investors’ financial goals when recommending investments. Brokers must examine the information in the investor’s profile, such as their age, risk tolerance, and tax status.

Regulation Best Interest (Reg-BI) is an SEC regulation that requires brokerage firms to put their clients’ best interests first. For example, firms must conduct reasonable due diligence when researching investments to ensure their recommendations are suitable for the investor.

What are REITs?

Real estate investment trusts (REITs) allow investors to pool their funds in a portfolio of income-generating real estate, and see returns without taking on responsibility for managing the properties. However, REITs tend to be illiquid, making them unsuitable for many investors. Non-traded REITs come with an extra degree of risk. 

What are BDCs?

Business Development Companies (BDCs) provide loans to distressed small- and medium-sized companies. The high interest rates BDCs charge to these companies can translate into high returns for investors, but the risk of businesses defaulting on their loans makes BDCs unsuitable for many investors.

Background Information

William Schumann has passed the following exams:

• Series 63 – Uniform Securities Agent State Law Examination
• SIE – Securities Industry Essentials Examination
• Series 7 – General Securities Representative Examination

William Schumann is a registered broker in 39 states and the District of Columbia. He is also a registered investment adviser in Illinois.

He has also worked for the following firms:

• H. Beck (CRD#:1763)
• Waterstone Financial Group (CRD#:10078)
• Dreher & Associates (CRD#:8665)
• FSC Securities (CRD#:7461)     
• Gary-Wheaton Stock Brokerage (CRD#:17080)

Kurta Law Can Help

If you worked with William Schumann and you have concerns about your investments, please contact us today at 877-600-0098 or info@kurtalawfirm.com for a free consultation.

For over 20 years, Kurta Law has advocated on behalf of investors who want to recover their investment losses from brokers and brokerage firms. Kurta Law is a nationally recognized law firm and exclusively represents investors against brokers and brokerage firms on a contingency basis. This means that the firm only earns a fee if our securities attorneys recover money on your behalf.