According to an InvestmentNews report, New Hampshire securities regulators want LPL Financial to shell out $3.6 million in fines and repayments to investors for allegedly unsuitable sales of real estate investments to elderly clients.
In a recent action, the New Hampshire Bureau of Securities Regulation reportedly said it is seeking $2.4 million from LPL in buybacks and restitution for clients in 48 sales of nontraded real estate investment trusts that date back to 2007. It also is imposing a $1 million fine and asking LPL to pay $200,000 in investigative costs.
The state alleges the sales were “unsuitable and unlawful” and that LPL failed to supervise its agents.
The case purportedly stems from an 81-year-old New Hampshire resident who bought a nontraded REIT from LPL in January 2008 and subsequently lost a substantial amount on the product, which typically is illiquid and comes with high fees.
The client invested $253,000 in the REIT and had a liquid net worth of $2.5 million. New Hampshire said that investment, and many others, caused elderly clients to hold a higher percentage of their portfolios in risky alternative investments than is allowed by LPL’s internal rules.
The 48 REIT sales that totaled approximately $2.4 million “resulted in an [alternatives] concentration that blatantly exceeded LPL guidelines,” the New Hampshire securities bureau wrote in its petition. It received the initial complaint in the fall of 2013.
Although a final decision has not yet been made in the case, the allegations bear a striking similarity to claims previously brought against LPL by the State of Massachusetts.
While it is great that regulators have stepped in, there still remain a number of investors whose interests will not be represented by this action. The White Law Group continues to investigate claims on behalf of those individuals.
Brokerage firms, like LPL Financial, have an obligation to perform due diligence and to ensure that all recommendations are suitable in light of the client’s age, net worth, investment objectives, income, and investment experience. If a firm fails to perform due diligence or makes unsuitable investment recommendations, they can be held responsible for any resulting losses through a FINRA arbitration claim.
If you suffered losses investing in non-traded REITs recommended to you by an LPL financial advisor, please call the securities attorneys of The White Law Group at 312/238-9650 for a free consultation.
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. For more information on the firm, visit https://www.whitesecuritieslaw.com.