Mass. Regulator William Galvin Charges SII Investments with Supervisory Issues
Massachusetts’ state securities regulator William Galvin has charged SII Investments with unethical conduct related to the sale of real estate investment trusts, according to an administrative complaint filed by the state.
According to the complaint, SII Investments allegedly let its agents artificially inflate its clients’ net worth figures, thus violating the firm’s own guidelines prohibiting a single non-traded REIT to account for more than 10% of a client’s net worth, or more than 20% in non-traded REITs in general.
According to Galvin, the practice allegedly resulted in almost $4.7 million in non-traded REITs sales and more than $300,000 in commission.
Non-traded REITs, because they’re highly illiquid, are especially risky compared to listed REITs, according to the complaint. Non-traded REITs typically have high fees and commissions, as well as limited redemption opportunities. This can expose non-traded REITs sellers to potential conflicts of interest, Galvin says in the complaint.
SII Investments apparently had internal compliance procedures to put the 10% cap on how much of the asset can be held in a client portfolio. Unfortunately for investors, the cap wasn’t actually put into practice, according to the complaint.
The regulators also noted that SII agents and a sales supervisor could not define the term “substantial penalty” and could not recall a time that they applied the definition when calculating a client’s liquid net worth.
SII Investments is a broker-dealer within the National Planning Holdings network, which was recently acquired by LPL Financial. LPL said that it would not be liable for the charges under the terms of its agreement with NPH.
“A firm must have real and meaningful supervisory procedures to prevent inappropriate sales,” Galvin wrote in a statement. “This firm did not have those and Massachusetts investors suffered. My office will not allow this to happen.”
This information is publically available and is provided by The White Law Group.
If you suffered losses investing with SII Investments and would like a free consultation to discuss your litigation options, please call The White Law Group at 1-888-637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Franklin, Tennessee.