LPL Financial REIT Problem Triggers Compliance Changes

LPL Financial REIT Problem Triggers Compliance Changes 150 150 Rex Securities Law

Update 2/7/2013: LPL settled the case over the improper sale of REITs for a $500,000 fine and restitution of $2 million. More details on that settlement here.

As we previously reported, in December 2012, Massachusetts securities regulators sued LPL Financial over charges that LPL failed to supervise its brokers who sold nontraded real estate investment trusts and permitted the brokers to make sales that violate company rules and state rules.

Here is the complaint, see page 7 for the various allegations.

NonTraded REITs that have declined in value substantially since their issue date include:

  • Cole Credit Property Trust II & III
  • Cole Credit Property 1031 Exchange
  • CNL Lifestyle Properties
  • Behringer Harvard
  • Dividend Capital Total Realty
  • Hines
  • Inland American
  • Retail Properties of America
  • Wells REIT
  • W.P. Carey Corporate Property Assoc. 17

In their complaint, the Massachusetts regulators charge LPL with dishonest and unethical business practices in connection with the sale of $28 million in these illiquid REITs to 600 citizens of that state  between 2006 and 2009. Massachusetts has a rule, as do other states, setting a maximum concentration limit for investments like nontraded REITs.

According to to a recent article in the Investment News, LPL recently told its 13,000 brokers and advisers that it is cracking down on the sale of risky and problematic products.

Is this crackdown by LPL a mere coincidence ? Probably not, more likely it’s related to the Massachusetts regulator action and what is likely to be fall out with other states as well as investors who are learning that their investments may not be as safe as they were led to believe.

Leveraged and inverse mutual funds are two  products LPL has warned its  brokers about. Both NASAA (the North American Securities Administrators Association) & the SEC included leveraged exchange-traded funds on it top 10 investor trap list several years ago.

If you have losses as a result of investing in nontraded REITs, ETFs, leveraged and inverse mutual funds, you may be able to recover all or a part of those losses through FINRA arbitration. Contact us to discuss your legal rights.

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Rex Securities Law

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