LPL Reaches $700K Settlement on Alabama Non-Traded REIT Sales
The Alabama Securities Commission finalized a consent order with LPL Financial LLC, the nation’s largest broker-dealer, in connection with an investigation of the firm’s sales transactions of non-traded real estate investment trusts to Alabama investors. The order requires LPL to offer to pay Alabama investors a total of $737,356.01.
The ASC, together with state securities regulators from multiple jurisdictions, conducted an investigation of LPL Financial to determine whether non-traded REIT sales transactions executed by the firm violated the Alabama Securities Act and the firm’s own internal procedures.
Sales transactions were examined to determine if they were made in excess of the REITs’ prospectus standards, were within the state concentration limit, whether the firm failed to implement an adequate supervisory system regarding the sale of non-traded REITs, and whether the firm failed to enforce its written procedures regarding the sales.
“Individual investors should always be cautious when considering specialized products like non-traded REITs,” said ASC director Joseph Borg. “These products, while legal and useful in the right financial circumstances, can also carry significant liquidity risk that may not be suitable for many ‘main street’ investors’ long-term financial circumstances.”
LPL Financial cooperated with the ASC and agreed to offer rescission on all sales of non-traded REITs executed between January 1, 2008 through December 31, 2013 that were made in violation of firm policy or prospectus standards. LPL also agreed to create a claim team to assist Alabama investors with its remediation procedures relevant to the settlement. Offering letters are being sent to those Alabamians affected.
