FINRA Suspends and Fines Former LPL Broker for Improper REIT Sales
The Financial Industry Regulatory Authority has suspended former LPL broker, Donald S. Woods, for six months and issued a $10,000 fine for improper sales of non-traded real estate investment trusts.
The Financial Industry Regulatory Authority has suspended former LPL broker, Donald S. Woods, for six months and issued a $10,000 fine for improper sales of non-traded real estate investment trusts, as well as for allegedly inflating customers’ net worth with respect to REIT purchases to circumvent LPL’s restrictions.
LPL guidelines prohibit registered representatives from recommending that customers invest more than a specified percentage of their liquid net worth in alternative investments, including REITs. The percentage restriction depended on, among other things, the customer’s age and investment profile. On two occasions, FINRA claims that Woods submitted applications to purchase REITs that overstated the customer’s liquid net worth in order circumvent LPL’s restrictions.
According to a letter of acceptance, waiver and consent issued by FINRA, Woods purportedly recommended that a retired husband and wife purchase shares in four non-traded REITs totaling $200,000.
The forms stated that the couple had a liquid net worth of approximately $700,000, and LPL’s guidelines restricted their holdings in alternative investments to 25 percent of their liquid net worth. FINRA claims that to circumvent this restriction, Woods submitted revised applications that stated a liquid net worth of $900,000.
FINRA also said that Woods recommended that an 84-year-old customer invest $54,000 in a REIT, which was purportedly inconsistent with her investment profile and short-term liquidity needs. In addition, he submitted an application claiming that her net worth was $746,000, when it was approximately $400,000, to skirt LPL’s 10 percent liquid net worth restriction for this customer.
He received $5,600 in commissions in connection with the recommendations, which he is required to disgorge as part of the agreement with FINRA.
Woods first became registered with FINRA in 1981 and spent nearly seven years with LPL Financial prior to his termination in January 2017. LPL disclosed to FINRA that it had terminated Woods’ registration due to a business dispute with his branch office. From December 2016 to August 2018, Woods was registered with Thurston Springer Financial, but is not currently registered with any firm.
According to his BrokerCheck profile, Woods has 10 pending and settled customer disputes, mostly alleging unsuitable investment recommendations.
Woods, who signed the AWC letter without admitting or denying the allegations, does not have any disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization.
