Walton Group Land Fund Investors May Have Recourse to Recover Investment Losses
Investors in various funds offered by the Walton Group of Companies (Walton Group) may be able to recover their investment losses if the recommendation to invest by a financial advisor lacked a reasonable basis, or if the investor was otherwise misled into making the investment.
Founded in 1979 and headquartered in Calgary, Canada, the Walton Group is focused on real estate development and “boasts one of the largest portfolios of pre-development land in North America with 106,000 acres of land assets under administration” including more than 80,000 acres in the southern and western United States. The Walton Group has disclosed ownership of $3.8 billion in land assets, acquired through a land syndication structure involving more than 90,000 investors worldwide.
The Walton Group has sponsored a series of investment funds, structured as limited partnerships, offered to investors as private placements. The Walton Group private placement offerings include the following limited partnerships:
Walton U.S. Development Fund, LP
Walton U.S. Land Fund 1, LP
Walton U.S. Land Fund 2, LP
Walton U.S. Land Fund 3, LP
Walton U.S. Land Fund 4, LP
Walton U.S. Land Fund 5, LP
Walton U.S. Land Fund 6, LP
Walton U.S. Land Fund 7, LP
Walton Land Opportunity Fund, LP
Walton Bluff Springs Land, LP
Walton Barrow Landing, LP
The Walton Group’s stated business objective is to acquire and hold tracts of raw land until they can be developed and sold later for a profit. However, many of the company’s projects have stalled in recent years, and investors who acquired an interest in a certain Walton Group fund are now left holding an illiquid investment of questionable value. In general, private placement investments—as offered under SEC Regulation D—are complex, expensive, and often fraught with risk.
In many instances, unregistered securities offered through a private placement are sold under a high fee and commission structure. Such high fees act as an immediate drag on investment performance, while simultaneously providing a financial advisor a powerful incentive to recommend such investments.
Furthermore, private placements carry a high degree of risk because they typically provide very little information to investors. Unlike publicly traded stocks which are registered with the SEC, and as such, must meet stringent registration and reporting requirements, private placements lack this level of regulatory oversight. In fact, private placement investors may be presented with unaudited financials or overly optimistic growth forecasts, or in some cases, with a due diligence report that was prepared by a third-party firm hired by the investment sponsor. In addition, investors in private placements may receive a private placement memorandum or similar offering circular and nothing else. This lack of robust information makes investing in unregistered securities through a private placement very risky.
As an investor in any of the Walton Group funds, you may have legal recourse to recover investment losses. Applicable securities rules and regulations mandate that broker-dealers must perform adequate due diligence on a financial product before recommending an investment to a customer. Further, your financial advisor must ensure that the investment being recommended is appropriate and in line with your investment objectives and risk profile. Specifically, FINRA’s Suitability Rule (Rule 2111) requires that reasonable diligence be conducted to determine if an investment is suitable, and to ascertain specific information including the customer’s age, financial situation, tax status, investment experience and objectives, other investments, as well as the customer’s time horizon and liquidity needs.
The attorneys at Giarrusso Law Group LLC have extensive experience with complex and esoteric private placement investments, including real estate. If you have suffered losses or are unable to exit your illiquid investment in any of the Walton Group land funds, you may contact our office by telephone at (201) 771-1115 or by email at info@gialawgroup.com for a no-cost, confidential consultation.