LPL Financial settled charges with the New Hampshire Bureau of Securities Regulation related to unsuitable and unlawful sales of non-traded real estate investment trusts (REITs), and for failing to supervise representatives engaged in the REIT sales. As part of the settlement, LPL will pay a $750,000 fine and additionally agreed to offer remediation "to any New Hampshire client that was sold a non-traded REIT since 2007," if such sale violated firm policy or other guidelines.
By one estimate, LPL could be on the hook for up to $8 million in restitution to affected customers in the latest round of allegations against LPL Financial, in what has become a nationwide crackdown on alleged REIT misconduct at the firm.
For instance, 14 customer disputes filed against ex-LPL broker Karl Horace Romero of Southern California from 2009 through 2016 alleged misrepresentation, unsuitable recommendations, negligence, and breach of fiduciary duty. In all, the various complaints against Romero sought over $1 million in damages, including one such civil litigation matter that appeared in Orange County Superior Court (Fullerton, California), involving unsuitable non-traded REIT sales that purportedly occurred at Romero's LPL office in Santa Ana, CA.
The NH consent order cited LPL brokers' failure to disclose "heightened risk" associated with non-traded REITs, and in some cases, failure to conduct thorough analyses regarding REIT suitability for investors, given their specific risk tolerances and investment objectives.
Furthermore, the regulator looked into LPL's REIT sales practices relative to concentration and whether non-traded REITs in some cases exceeded preset percentages of customers' liquid net worth, finding that in some cases the non-traded REIT sales exceeded either LPL's own guidelines or product-specific restrictions.
State regulators began their investigation of LPL Financial's REIT selling practices after an elderly investor filed a complaint alleging significant losses after purchasing several non-traded REITs through LPL.
In 2015, FINRA censured LPL Financial and ordered the firm pay $11.7 million in fines and restitution for a series of supervisory failures regarding sales of non-traded REITs, exchange-traded funds (ETFs), and variable annuities (VAs).
In 2012, the Massachusetts Securities Division sued LPL Financial over non-traded REIT sales that the state alleged were in excess of prospectus limits and in violation of LPL's internal compliance guidelines. In its action, the State called LPL a "boat with many holes," noting that at least 95% of LPL's non-traded REIT transactions violated either prospectus limits, Massachusetts requirements, or both.
If you have suffered financial damages after investing with LPL Financial, Karl Horace Romero, or with another broker or investment adviser in unsuitable non-traded REITs or other complex investment products in excess of firm concentration guidelines, or in conflict with your specific risk tolerance preferences or investment objectives, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
News: NH Securities Bureau Settles Action Against LPL Financial Over Non-Traded REITS for $750,000 (NH Regulator)