Reference
DST & FINRA Arbitration Glossary
Plain-English definitions of the terms every Inspired Healthcare Capital investor should understand before deciding whether to pursue a FINRA arbitration claim.
Delaware Statutory Trust (DST)
A legal entity used in real estate investment where multiple investors hold fractional beneficial interests in a property or portfolio of properties. DSTs are commonly used as 1031 exchange replacement properties because the IRS ruled them eligible for tax-deferred exchanges. Investors have no management role and cannot vote to replace the sponsor. DSTs are illiquid — there is no established secondary market, and investors typically cannot redeem their interest until the trust sells the underlying asset.
FINRA (Financial Industry Regulatory Authority)
A self-regulatory organization that oversees U.S. broker-dealers and their registered representatives. FINRA writes and enforces rules governing the sale of securities, including DSTs. When a broker violates FINRA rules — for example, by recommending an unsuitable investment or making a material misrepresentation — investors can file a claim through FINRA's arbitration process to seek compensation.
FINRA Arbitration
A private dispute resolution process administered by FINRA for resolving securities claims between investors and broker-dealers. Arbitration is faster and less expensive than litigation. A panel of neutral arbitrators hears evidence and issues a binding award. Most brokerage account agreements require arbitration instead of court. FINRA arbitration is available to investors nationwide regardless of where the investor or the broker is located.
1031 Exchange
A provision under Section 1031 of the Internal Revenue Code that allows a real estate investor to defer federal capital gains taxes by reinvesting the proceeds of a sold property into a "like-kind" replacement property within specified time limits (45 days to identify, 180 days to close). DSTs are commonly used as 1031 replacement properties. The deferred taxes become due when the replacement property is eventually sold without another exchange.
Regulation Best Interest (Reg BI)
A SEC rule effective June 2020 that requires broker-dealers to act in the "best interest" of retail customers when making investment recommendations. Reg BI replaced the prior "suitability" standard with a higher obligation — brokers must consider costs, risks, and alternatives, and cannot place their own financial interests (such as higher commissions on DSTs) above the client's interest. Violations of Reg BI are a basis for FINRA arbitration claims.
Suitability
A FINRA rule (Rule 2111) requiring brokers to have a reasonable basis for believing that a recommended investment is appropriate for a specific customer, based on that customer's investment profile — including age, financial situation, tax status, risk tolerance, investment objectives, and investment experience. Recommending an illiquid DST to a retiree who needs income and liquidity is a classic suitability violation.
Concentration Risk
The risk arising when too large a portion of an investor's portfolio is held in a single investment, sector, or issuer. FINRA rules require brokers to consider concentration risk when making recommendations. Many IHC DST investors had 25% to 100% of their investable assets placed into a single DST or a portfolio of DSTs all operated by the same company — Inspired Healthcare Capital. When IHC failed, their entire investment was at risk.
Illiquidity Risk
The risk that an investor cannot sell or redeem an investment when needed. DSTs have no secondary market — once invested, capital is locked in until the trust disposes of its assets, which can take 5–10 years or more. Brokers are required to disclose illiquidity risk clearly. Many IHC DST investors were told they could exit if needed, or were not informed of the lock-in period at all.
Broker-Dealer
A firm or individual licensed by FINRA to buy and sell securities on behalf of clients (broker) or for its own account (dealer). Broker-dealers are responsible for supervising their registered representatives and ensuring that products sold to clients comply with FINRA rules. When a broker at a firm commits a suitability violation or misrepresentation, the firm itself is typically the respondent in a FINRA arbitration claim.
Registered Investment Advisor (RIA)
A person or firm that provides investment advice for a fee and is registered with the SEC or state securities regulators. RIAs have a fiduciary duty — a legal obligation to act in the client's best interest at all times. RIAs who recommended IHC DSTs may face claims under the Investment Advisers Act in addition to, or instead of, FINRA arbitration.
Material Misrepresentation
A false statement of fact, or an omission of a material fact, that influences an investor's decision to buy or hold a security. In IHC DST cases, common misrepresentations include overstating the financial stability of Inspired Healthcare Capital, understating the risks of a single-operator DST, or failing to disclose that IHC's facilities were operating at a loss.
Contingency Fee
A fee arrangement in which the attorney is paid only if there is a recovery for the client. Bixby Law handles FINRA arbitration cases on a contingency fee basis — you pay nothing unless we recover money for you. Contingency arrangements align the attorney's incentive with the client's goal.
Bankruptcy (Chapter 11)
A federal legal process in which a company seeks court protection from creditors while restructuring its debts. Inspired Healthcare Capital filed for Chapter 11 bankruptcy in 2024. Bankruptcy affects the underlying DST assets but does not bar investors from pursuing FINRA arbitration claims against the broker-dealers and registered representatives who sold the investments.
Due Diligence
The investigation a broker-dealer is required to conduct before recommending an investment product to clients. FINRA rules require firms to have a reasonable basis for any recommendation, which means conducting adequate due diligence on the issuer, the product structure, and the risks. Failure to conduct adequate due diligence on IHC DSTs — or ignoring red flags in that due diligence — is a basis for a FINRA arbitration claim.
Arbitration Award
The final decision issued by a FINRA arbitration panel after a hearing. Awards are binding and enforceable in federal court. FINRA arbitration awards can include compensatory damages (the amount lost), interest, and in some cases attorney fees and other costs. Awards are published on FINRA's public arbitration database.
Questions About Your Specific Situation?
Understanding the terminology is just the first step. Contact Bixby Law for a free, confidential review of your IHC DST investment.