Update 2/7/2013: LPL Financial settled the case brought by Massachusetts securities regulators for improper sale of non traded REITs. More details here.
December 12, 2012, William Galvin, the head securities regulator for
Massachusetts charged LPL Financial, LLC of San Diego with a failure to
supervise brokers who sold non-exchange traded real estate investment
trusts (REITs) in violation of state limitations and company rules.
Massachusetts also charged LPL with dishonest and unethical business
The Massachusetts charges are the result of the sale of nontraded REITs
during 2006 to 2009. Of some 600 sales examined, the Securities Division
found that 569 had regulatory violations including violations of
concentration limits, sales made in violation of prospectus requirements
and sales in violation of LPL compliance rules. With more than 13,000
brokers nationwide, LPL is one of the largest sellers of non-traded
Here is a link to the 34 page complaint on the Massachusetts Securities Division website.
They are focusing on seven non-traded REITs sold by LPL:
- Inland American
- Cole Credit Property Trust II
- Cole Credit Property Trust III
- Cole Credit Property 1031 Exchange
- Wells REIT II
- W.P. Carey Corporate Property Assoc. 17
- Dividend Capital Total Realty
Other popular non traded REITs sold by broker dealers that have not fared well include:
- Behringer Harvard
- Retail Properties of America
- CNL Lifestyle Properties
Non-exchange traded REITs are not traded on any conventional exchange making liquidation when cash is needed, very difficult. Many of the REITs are down 40-50% or more in value since when they were purchased. FINRA has been concerned about these investments for some time as we previously have written.
In prior blog postings
we have addressed the fact that many retirees were sold these REITs
with the promise of steady, dependable distributions of income and with
the belief that the value would remain constant or increase. Most did
not understand that due to the fact they are not traded, there
essentially is little or no market if the investor wishes to liquidate.
If you purchased nontraded REITs based upon misrepresentations you may be able to recover some or all of your losses.
Robert H. Rex, Esq. been helping
investors recover investment losses for over twenty years. We represent
clients nationwide. Contact us for a no cost consultation.
561 391 1900