On Wednesday, Massachusetts regulators ordered the independent broker-dealer LPL Financial (LPLA) to pay up to $2 million to investors who had bought shares of nontraded real estate investment trusts (REITs) and pay a $500,000 administrative fine.
The case, which was announced in in December, concerns close to 600 transactions of nontraded REITS that took place between 2006 to 2009, valued at about $28 million. The Enforcement Division in the Massachusetts Securities Division noted that 36 trades worth about $2.1 million were made in violation of prospectus rules and asset-concentration limitations.
In 33 of the 36 cases, advisors affiliated with LPL Financial and operating in the state broke the asset-concentration limits. In the other three cases, the sales were made in excess of net-worth restrictions, which limit investors 70 and younger to holding a maximum of 20% of their net worth in alternative investments and those older than 70 to holding a maximum of 10% of their net worth in such products.
“LPL worked cooperatively with the commonwealth of Massachusetts to appropriately resolve all of the issues raised, and we are glad to put this matter behind us,” said a spokesperson in a statement. “Under the terms of the consent agreement, certain customers, at their discretion, will have an opportunity to sell their shares of nontraded REITs to LPL or its designee for the price they originally paid. We remain committed to ensuring that our clients and the investing public are well served now and in the future.”