In a rare move, the Financial Industry Regulatory Authority (FINRA) made the decision last week to bar an individual broker for violations of securities industry rules tied to sales of non-traded real estate investment trusts (REITs).
As reported by Investment News, former LPL Financial broker Gary Chackman was accused of falsifying documents related to sales of the REITs from 2009 to 2012. Chackman was registered with LPL from 2001 to 2012 when LPL terminated his registration for violating the firm’s policies and procedures concerning sales of the alternative investments.
Chackman “recommended and effected unsuitable transactions in the accounts of at least eight LPL customers, by overconcentrating his customers’ assets in [REITs] and other illiquid securities,” according to FINRA’s letter of acceptance, waiver and consent, dated Dec. 12.
“Additionally, Chackman falsified LPL documents to evade the firm’s supervision and caused the firm’s books and records to be inaccurate by submitting dozens of ‘alternative investment purchase’ forms that misrepresented his customers’ purported liquid net worth,” the letter said.
According to the Investment News article, Chackman’s BrokerCheck report lists three arbitration claims with settlement amounts of $747,000. He also faces a pending investigation courtesy of the Securities and Exchange Commission (SEC).
Non-traded REITs have been under the radar of FINRA, as well as several state securities regulators for some time now. The products generate high-commissions for the brokers and registered representatives that sell them to investors.
Earlier this year, William Galvin, Massachusetts Secretary of the Commonwealth, announced settlements with six broker/dealers for $21.6 million in restitution to clients over sales of non-traded REITs. The firms, which included LPL, have since paid fines of nearly $1.5 million.