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Five independent broker/dealers will pay $8.6 million in restitution to investors, as well as fines of $975,000, as part of settlements involving sales of non-traded real estate investment trusts (REITs). The settlements were announced today by Secretary of the Commonwealth of Massachusetts William Galvin.
The five firms that agreed to the settlements are: Amerprise Financial Services, with $2.6 million in restitution and a fine of $400,000; Commonwealth Financial Network, with $2.1 million in restitution and a $300,000 fine; Royal Alliance Associates, with $59,000 in restitution and a $25,000 fine; Securities America, with $778,000 in restitution and a $150,000 fine; and Lincoln Financial Advisors Corp., with $504,000 in restitution and a $100,000 fine.
“Our investigation into the sales of REITs, triggered by investor complaints, showed a pattern of impropriety on the sales of these popular but risky investments on the part of independent brokerage firms where supervision has historically been difficult to monitor,” Galvin said in a statement.
“The enforcement section’s investigation revealed significant and widespread problems with the firms’ compliance with their own policies, practices and procedures rules and adherence with Massachusetts prospectus requirements leaving investors often trapped in illiquid and underperforming financial products,” Galvin added.
In addition to the settlements with the five broker/dealers, Galvin announced that LPL Financial had completed the second round of its restitution in connection to similar non-traded REIT violations settled with the Massachusetts securities regulator in December.
The additional $2.6 million from LPL brings the total restitution in the state of Massachusetts from improper REIT sales to more than $11 million, with fines of more than $1.4 million.