According to reports, LPL Financial has been ordered by the Massachusetts Security Division to pay restitution of more than $2 million to investors who bought shares of nontraded real estate investment trusts from the firm.
Massachusetts regulators also hit LPL Financial with a $500,000 administrative fine over the matter, which involved investors who bought shares of several different nontraded REITs in violation of state limitations, and the company’s own rules and procedures.
LPL also has agreed to review all nontraded REITs sold in Massachusetts and offered to make restitution to all other investors who bought the securities in violation of state limits or company rules.
According to these same reports, LPL Financial and Ameriprise Financial Inc. are the two biggest sellers of nontraded REITs, accounting for almost 20% of the industry’s annual sales of $10 billion. Regulators recently have put the nontraded REITs on close watch as a number of the largest REITs have suffered sharp devaluations.
In its consent order with Massachusetts regulators, LPL Financial admitted to a series of statements of fact around the sales of the REITs but neither admitted nor denied allegations stemming from the training and oversight of sales of nontraded REITs as well as alleged violations of securities laws.
According to the statement of fact section of the order, LPL reps sold nontraded REITs in excess of Massachusetts maximum concentration limits imposed by the prospectuses of REITs for 33 residents. The REIT sales occurred between 2006 and 2009. Last summer, the firm began tightening its policies around such REIT sales after being contacted by Massachusetts regulators.
Massachusetts also alleged that LPL’s training and oversight of nontraded REIT sales were insufficient.
The White Law Group continues to investigate claims against LPL and other brokerage firms involving nontraded REITs.
In the firm’s experience, nontraded REITs are often oversold by financial advisors because of the large commissions the products offer (often between 7-10%).
Financial advisors and broker-dealers have a duty to their clients to perform the necessary due diligence on an investment before offering it for sale to their clients and to ensure that any investment recommendation that is made is suitable in light of the client’s age, investment experience, net worth, and investment objectives. Unfortunately, many brokers often down play or hide the risk involved in non-traded REITs and sell the investments as safe, income producing investments.
If you suffered losses in a nontraded REIT and would like to discuss your litigation options, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
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