LPL Financial (LPLA) has agreed to pay 3.2 million fine to settle penalties related to its sale of nontraded real estate investment trusts and leveraged exchange-traded funds. The settlements were reached with the Non-Traded REIT Task Force of the North American Securities Administrators Association and regulators in Massachusetts and Delaware. The firm sold the REITs at issue for six years beginning in 2008.
Under the agreement, LPL will pay $1.425 million in civil penalties for its purported failures to put into place a supervisory system that was adequate enough to handle its nontraded REIT sales and enforce written procedures related illiquid trust sales. The money will be divvied up between the District of Columbia, 48 states, the U.S. Virgin Islands, and Puerto Rico. By settling with NASAA, LPL is not denying or admitting wrongdoing.
Also, the Delaware Attorney General and the Massachusetts Attorney General have arrived at their own settlements with LPL’s Boston arm. The firm consented to pay $1.8 million for putting about 200 clients from Massachusetts in high-risk leveraged ETFs. The broker-dealer and Massachusetts had come to an earlier settlement about nontraded REIT sales two years ago.
According to Massachusetts AG William Galvin, there were purported violations related to LPL’s marketing sales, training, and oversight of high-risk leveraged ETFs. His office said that some clients sustained losses because they held these leveraged ETFs for long chunks of time. The AG said that the firm did not properly supervise financial advisers who were responsible for these clients holding the investments for extended periods and was inconsistent in following its own policy of fining financial advisers who went beyond the concentration limits.
Of the $1.8 million, $1.6 million will pay back investors and go toward investor education and $200,000 is a penalty. $200,000 will go to Delaware. Also pursuing LPL for its alleged unsuitable nontraded REIT sales is the state of New Hampshire, which is seeking $3.6 million in fines.
In May, LPL consented to pay $11.7 million to resolve Financial Industry Regulatory Authority charges contending that an LPL unit did not properly supervise nontraded REITs, leveraged ETFs, and other complex products. The securities firm settled the case without denying or admitting to the charges.
Contact our REIT fraud lawyers if you suspect you were the victim of financial fraud.
LPL Pays More Than $3.4 Million to Settle Two Probes, The Wall Street Journal, September 23, 2015
Alleged Alternative Sales Violations Cost LPL Another $3.3 Million, Wealth Management, September 23, 2015