According to reports, Massachusetts has begun a sweep investigation of 15 brokerage firms, looking at sales practices involving alternative investments sold to seniors.
The targeted firms are reportedly: Morgan Stanley, Merrill Lynch, UBS Securities LLC, Fidelity Brokerage Services LLC, Charles Schwab & Co. Inc., Wells Fargo Advisors, TD Ameritrade Inc., ING Financial Partners Inc., LPL Financial LLC, Commonwealth Financial Network, MML Investor Services LLC, Investors Capital Corp., Signator Investors Inc., Meyers Associates LP, and WFG Investments Inc.
The state’s securities division today apparently sent subpoenas to each of these firms, asking for information on sales of the products to state residents who are 65 or over. Nontraditional investments include oil and gas partnerships, private placements, structured products, hedge funds and tenant-in-common offerings.
These are complex and high-risk investments that are really only suitable for sophisticated investors. Unfortunately, because the investments often offer nice distribution payments, they can be attractive to retired investors looking for income. That, coupled with the fact that the investments are extremely high commission investments for the brokers that sell them, leads to unscrupulous brokers glossing over the risks of these products to sell them to their less sophisticated retired clients.
Massachusetts has purportedly demanded information on any such products that have been sold over the past year, the investors who purchased them, the commissions generated, how the sales were reviewed, and all relevant compliance, training and marketing materials.
Massachusetts is leading the charge to better regulate alternative investments. The state has already cracked down on a number of firms for alleged improper sales of nontraded REITs. In fact, in May, it settled REIT cases with Ameriprise FinancialServices Inc., Commonwealth Financial Network, Lincoln Financial Advisors Corp., Royal Alliance Associates Inc. and Securities America Inc., with the five firms agreeing to pay a total of $6.1 million in restitution to investors, and fines totaling $975,000.
Massachusetts also reached a settlement with LPL Financial to pay at least $2 million in restitution and $500,000 in fines related to the sale of nontraded REITs.
Though its regulatory power, Massachusetts may be able to clean up this area of the securities industry, for those that have lost money in these investments, it may be too little too late.
The White Law Group continues to investigate potential arbitration claims against the firms that pushed these high-risk investments. The firm is currently representing investors in FINRA arbitration claims that suffered losses in the following alternative investments, among others:
Cypress Equipment Leasing
IMH Secured Loan Fund
SCI Mezzanine Fund
REEF Oil and Gas
If you have suffered losses in an alternative investment 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 firm, visit http://www.whitesecuritieslaw.com.