LPL Financial Fined $1M for Sales of Unsuitable REITs
New Jersey securities regulators have fined brokerage firm LPL Financial for failure to supervise brokers who allegedly sold unsuitable REITs. The fine requires LPL Financial to pay $950,000 and an additional $25,000 to a state investor education fund.
LPL Financial Ignored Non-traded REIT Regulations
The regulators claim that LPL Financial let brokers sell excessive amounts of illiquid, non-traded Real Estate Investment Trusts (REITs), ignoring guidelines regarding such alternative investments. According New Jersey securities regulators, there were numerous instances where LPL customers were sold excessive concentrations of REITs and other illiquid investments.
Non-traded REITs are high-commission products that have come under scrutiny and fallen out of favor as the industry adapts to the Department of Labor’s fiduciary rule for retirement accounts. These investments often carry hefty 10% commission costs. And a very large percentage of the total commission gets paid directly to the individual broker at independent brokerage firms like LPL.
LPL Supervisors Must Do Their Jobs
Because of the significant commissions paid from these products, unscrupulous brokers often recommend excessive amounts of these securities to line their pockets with commissions. That is where LPL supervisors should come in. They are the first line of defense to protect brokerage firm customers from broker fraud. If they don’t do their job, investors get hurt by bad brokers.
According to the filings, LPL failed to follow its own supervisory guidelines regarding the offering and sale of nontraded REITs. The regulators also claimed that LPL failed to keep proper books and records of the transactions made. The state’s review of LPL revealed more than 5,200 non-traded REIT sales and 2,100 illiquid BDC sales, as well as additional transactions that involved closed-end funds and other alternative investments.
LPL Financial Previously Fined for Non-traded REITs
Regulators have disciplined LPL Financial several times over sales of non-traded REITs, forcing the firm to pay millions of dollars in fines and repayments to clients.
LPL’s troubles date back to February 2013, when it agreed to a $2 million settlement with the state of Massachusetts, as well as $500,000 in fines and restitution, for the sale of non-traded REITs.
In September 2015, LPL payed a $1.43 million fine and returned money to clients for inappropriate sales of non-traded REITs. In December of that same year, LPL paid a $750,000 fine for selling non-traded REITs that violated LPL’s guidelines.
The firm also offered to pay remediation to any New Hampshire client who was sold a non-traded REIT since 2007 if the sale exceeded LPL’s own guidelines or product-specific restrictions.
Did You Lose Money Investing with LPL Financial?
If you believe you have lost money investing with LPL Financial, you may have certain legal rights that require your immediate attention.
Call an Investment Fraud Attorney Today
If you are looking for an investment fraud attorney to review your rights and options, the investment fraud lawyers at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions.