American Finance Trust, Inc. (AFIN) Accused of Filing Misleading Registration Statement

According to the complaint against the company's officers and directors for alleged violations of the Securities Act of 1933 pursuant to the company's October 2016 merger with American Realty Capital, AFIN's registration statement issued in connection with the merger misled investors about the consequential negative financial impact to the merged companies and shareholders. Specifically, AFIN misled investors about changes to advisory agreements between AFIN and American Finance Advisors, Inc. and the advisory agreement between RCA and RCA advisers, which were conditioned upon approval of the merger. When AFIN filed the registration statement on October 21, 2016 in connection with the merger, AFIN officials failed to disclose that externally managed real estate investment trusts such as AFIN incur higher advisory fees and trade at massive discounts. In addition, the registration statement omitted important information about AFIN's inability to obtain a public listing of its stock in 2015 and 2016. When AFIN listed its stock for public trading in July 2018, the company's stock plunged.

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