Skip to content

New Hampshire Fines NEXT Financial Over Unsuitable REIT Sales

The New Hampshire Bureau of Securities has fined NEXT Financial Group Inc., a Texas-based broker-dealer and investment adviser, $235,000 for allegedly failing to reasonably supervise the sale of non-traded real estate investment trusts to a number of clients.

The New Hampshire Bureau of Securities has fined NEXT Financial Group Inc., a Texas-based broker-dealer and investment adviser, $235,000 for allegedly failing to reasonably supervise the sale of non-traded real estate investment trusts to a number of clients.

Last week, the Massachusetts Securities Division also fined the broker-dealer $150,000 for unsuitable non-traded REIT sales.

The New Hampshire Bureau of Securities initiated a formal investigation after it received a complaint from a Massachusetts resident alleging that Charles Chester Kulch, a registered representative of NEXT Financial, had sold him securities that were not suitable.

“During the course of its investigation, the Bureau found that between 2009 and 2016, NEXT failed to reasonably supervise the sale of certain alternative investments to a number of clients,” the consent order states. “Specifically, the factors contributing to the unsuitable sales related to exceeding concentration guidelines of non-traded real estate investment trusts, not complying with income thresholds as defined by each prospectus, errors apparent on purchase-related documents, and sales made to clients over the age of 80.”

NEXT brokers are permitted to offer and sell alternative investments to their clients if they meet certain criteria, including minimum annual income and liquid net worth, risk tolerance and investment objectives.

The Bureau said that NEXT Financial brokers sold non-traded REITs to a number of clients over the age of 80, which its policies and procedures discourage. Some brokers purportedly exceeded the concentration guidelines set by the firm, while some sold non-traded REITs to clients that did not have the annual income required by each REIT’s prospectus.

In addition to the fine, NEXT Financial must also pay the regulator’s costs of $90,000, for a total amount of $325,000.

Click here to visit The DI Wire directory sponsor page.