LPL Financial LLC has been ordered by the Massachusetts Security Division to pay restitution of more than $2 million to investors who bought shares of non-traded real estate investment trusts (REITs).
In addition to the restitution order, Massachusetts regulators levied a $500,000 administrative fine against LPL. As reported Feb. 6 by Investment News, the settlement stems to allegations that LPL failed to supervise brokers who sold investments in non-traded REITs. LPL also agreed to review all other non-traded REITs offered to Massachusetts residents and to make restitution to investors in the state whose transactions violated Massachusetts or company rules.
LPL Financial and Ameriprise Financial are big players in the non-traded REIT world. They account for almost 20% of the industry’s annual sales of $10 billion. Recently, regulators have put non-traded REITs on their 2013 priority watch list, reviewing how the products are sold and whether advisers and broker/dealers may be misrepresenting the investments to clients.
In its consent order with Massachusetts regulators, LPL admitted to a series of statements of fact around the sales of the REITs. In doing so, however, the firm neither admitted nor denied allegations stemming from the training and oversight of sales of the products.