CREATIVE MEDIA & COMMUNITY TRUST CORPORATION (CMCT) PREFERRED STOCK – INVESTOR ALERT

CREATIVE MEDIA & COMMUNITY TRUST CORPORATION (CMCT) PREFERRED STOCK – INVESTOR ALERT.

Investors who purchased Creative Media & Community Trust Corporation (CMCT) preferred stock through a broker or financial adviser may want to review whether the investment was suitable for their financial circumstances and investment objectives.

Call 800-500-4442 if you believe that your financial adviser or broker recommended an unsuitable CMCT investment.

Creative Media & Community Trust Corporation, formerly known as Creative Media & Community Trust Corporation, is a publicly reporting real estate investment trust (REIT) that has offered several series of preferred stock to investors, including Series A, Series A1 and Series D Preferred Stock. These securities have been distributed through broker-dealers and other participating financial firms.

CMCT preferred stock may have been presented to investors as an income-producing investment. However, CMCT’s offering documents disclosed significant risks that investors and their financial advisers should have considered before recommending the investment.

CMCT Preferred Stock Was Not Publicly Traded

One important consideration was the lack of a public market for CMCT preferred stock.

CMCT’s offering documents disclosed that there was no public market for the preferred stock and that investors might not be able to sell their shares promptly or at all. Investors could therefore face significant difficulty liquidating their investment.

Illiquidity can be particularly important when evaluating an investment for retirees, conservative investors, or investors who require access to their capital.

CMCT Could Redeem Preferred Stock With Common Stock

Another significant risk involved CMCT’s ability to satisfy certain redemptions with shares of CMCT common stock rather than cash.

This distinction is important. An investor purchasing preferred stock may reasonably expect a preferred security with a stated value and dividend rights. However, if the company exercises a redemption right and pays the investor in common stock, the investor becomes exposed to the market value and volatility of that common stock.

CMCT has, in fact, redeemed preferred shares by issuing common stock. Investors who received common stock in connection with these redemptions could experience substantial losses if the value of the common shares declined.

Preferred Stock Dividends Were Not Guaranteed

CMCT’s offering documents also disclosed that dividends on its preferred stock were not guaranteed and could be decreased or suspended.

Although the preferred securities carried dividend provisions, investors faced the risk that expected income would not continue as anticipated.

That risk should have been evaluated based on each investor’s financial circumstances, need for income, risk tolerance, and investment objectives.

CMCT Preferred Stock Was Unrated

CMCT also disclosed that its preferred stock was not rated by a nationally recognized statistical rating organization.

The absence of a credit rating does not mean that an investment is necessarily unsuitable. However, it is another factor that a broker or financial adviser should consider when evaluating the security for an individual investor.

Broker Compensation May Have Created Conflicts

Another issue investors should examine is the compensation paid in connection with the offering.

CMCT’s offering documents provided for substantial selling compensation in connection with certain preferred-stock offerings. For the Series A1 offering, the prospectus provided for selling commissions of up to 7%, together with a dealer-manager fee of up to 2%.

CCO Capital, LLC served as the dealer manager, and the offering documents permitted participating broker-dealers to receive compensation in connection with sales.

Compensation does not establish that a recommendation was improper. However, when a financial professional recommends a security that pays substantial commissions or other compensation, investors should consider whether the recommendation was based on their best interests and whether the risks and compensation were adequately disclosed.

Were CMCT Preferred Stock Recommendations Suitable?

The central question for an investor is not simply whether CMCT preferred stock ultimately declined in value.

The more important question is whether the investment was suitable when it was recommended and purchased.

A broker or financial adviser should consider an investor’s:

• Age;
• Financial circumstances;
• Investment experience;
• Risk tolerance;
• Need for income;
• Liquidity needs;
• Investment objectives;
• Concentration in CMCT or other illiquid investments; and
• Ability to withstand a loss of principal.

An investment that may be appropriate for one investor may be unsuitable for another.

For example, an investor seeking preservation of capital and reliable access to funds may have very different investment needs from an investor willing to accept substantial illiquidity and market risk.

Investors Should Examine How CMCT Was Recommended

Investors who purchased CMCT preferred stock should review how the investment was presented by their broker or financial adviser.

Questions investors may want to consider include:

Was CMCT preferred stock presented as a safe or conservative investment?

Was the investment recommended primarily because of its dividend?

Were the risks associated with the lack of a public trading market explained?

Was the possibility of receiving common stock instead of cash in a redemption adequately explained?

Was the possibility of reduced or suspended dividends explained?

Was the security’s lack of a credit rating discussed?

Was the broker-dealer receiving commissions or other compensation from the transaction?

Was CMCT a substantial or concentrated portion of the investor’s portfolio?

Was the investment consistent with the investor’s stated risk tolerance and need for liquidity?

These questions may be particularly important for investors who were seeking income and preservation of capital.

FINRA Complaints Involving CMCT Investments

There have also been customer disputes involving recommendations of CMCT securities.

One FINRA BrokerCheck disclosure involves allegations concerning the suitability of CMCT, including an allegation seeking $250,000 in damages. Investors should therefore examine their own account records and determine whether similar suitability, disclosure, supervision, or compensation issues may exist.

May Recover Investor Losses

Goodman & Nekvasil, P.A. investigates claims involving financial advisers and brokerage firms and represents investors in FINRA arbitration.

Investors who purchased CMCT preferred stock, including Series A, Series A1 or Series D Preferred Stock, may want to determine whether their broker or financial adviser adequately evaluated the investment before recommending it.

Potential claims may involve unsuitable investment recommendations, failure to adequately disclose risks, inadequate due diligence, excessive concentration, breach of fiduciary duty, conflicts of interest, compensation, and failure to supervise.

Investors who believe they suffered losses after purchasing CMCT preferred stock through a broker-dealer or financial adviser can contact Goodman & Nekvasil, P.A. at 800-500-4442 for a free evaluation of a potential investment-loss claim.

Goodman & Nekvasil, P.A. is investigating brokers who may have unsuitably recommended investments to their clients.

St. Petersburg, Florida law firm Goodman & Nekvasil, P.A., has a national practice representing victimized investors.  The  firm continues to investigate brokerage firms that placed elderly retirees and other conservative investors in unsuitable investments.

Goodman & Nekvasil, P.A., has filed numerous cases against brokerage firms selling high-risk investments and has recovered more than $600 million dollars on behalf of victimized investors.

We allege in these cases that these investment recommendations were unsuitable for our clients in view of their financial situation, needs and investment objectives.

There is no charge for an evaluation of your case. We handle our cases on a contingency fee basis. This means that unless we recover money for you, we charge no attorney’s fee.

If you incurred losses on your investment and would like your case evaluated by a securities attorney, please contact us.

Some of the information in this blog post was obtained from FINRA on 9/10/26. If you believe this information was reported incorrectly, please contact our firm: 1-800-500-4442.