A recent FINRA report found that a broker with LPL Financial sold several elderly customers risky non-traded real estate investment trust (REIT) products, even with policies in place at LPL that were designed to prevent such unsuitable recommendations from occurring.
Although LPL's policies limit alternative investment holdings (including REITs) to a certain percentage of the customer's liquid net worth, investigators found that LPL Financial's broker purportedly circumvented this restriction by improperly inflating the net worth of several senior citizen investors at the firm. For instance, one customer's real-life liquid net worth of $400,000 was inflated to $746,000, effectively increasing that client's 10% alt investment limit from $40,000 to $74,600.
As a result, LPL purportedly allowed this customer to invest $54,000 in a REIT when the limit should have been no greater than $40,000...and that's without regard to the core suitability issue posed by risky products such as REITs, including low liquidity, excessive fees/commissions, and leverage.
Had the customer's net worth been accurately reported, the unsuitable $54,000 REIT transaction may never have occurred.
In addition to falsification of records and inaccurate books and records, investigators wrote that the REIT recommendations were unsuitable for reasons beyond simple overconcentration: The REIT itself carried far more risk than the 84-year-old customer's investment profile allowed.
In April 2020, LPL Financial and a handful of other brokerage firms including Cetera Financial Group and Advisor Group moved to shut down REIT sales in the wake of COVID-19's detrimental bear market effect on volatile and risky alt investments.
If you invested with an LPL Financial broker or financial adviser at any firm whose false statements, artificial and fabricated inflation of your net worth, or unsuitable recommendations in risky alternate investments or REITs resulted in over-concentration or other financially harmful scenario that harmed your investment portfolio, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.