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LPL Financial LLC, the largest independent U.S.broker/dealer by revenue, has been accused by Massachusetts securities watchdog Secretary of the Commonwealth William F. Galvin of dishonest and unethical business practices and failure to supervise the brokers who made improper sales of seven non-traded real estate investment trusts (REITs).
According to Galvin’s complaint, LPL earned at least $1.8 million in commissions on the sales from 2006 through 2009.
“At their core, non-traded REIT products operate through an immensely complex affiliated and subsidiary structure rife with conflict,” the complaint said. “LPL’s lack of adequate training and supervision only exacerbated problems.”
The Massachusetts complaint could be good news for investors who’ve filed arbitration claims against LPL Financial in connection to sales of the non-traded REITs in question.
“Massachusetts in particular has been at the forefront to put specificity in complaints [against broker/dealers], and references to documents,” said Steven Caruso, a partner at Maddox Hargett & Caruso PC, in a Dec. 16 article by Investment News. “That is tremendously helpful” for clients suing a firm.
Caruso called the Massachusetts complaint “a very helpful road map for investors” in litigation, adding that Maddox, Hargett & Caruso has at least seven claims in the pipeline against LPL over disputes involving non-traded REITs.
Massachusetts is seeking full restitution to clients who were sold REITs allegedly in violation of state and prospectus requirements. It is also seeking an unspecified administrative fine against LPL.