BDs Subpoenaed on Alt Sales to Seniors

Secretary of the Commonwealth of Massachusetts William Galvin launched an exam sweep Wednesday into broker-dealers’ sales of alternative investments to seniors, calling the often-risky products “accidents waiting to happen.”

Galvin, who heads the Massachusetts Securities Division, subpoenaed BDs doing business in the state and asked them for information on their sales of alt products to seniors to determine the firms’ supervision, compliance and training associated with the sales of these products.

Subpoenas went to Morgan Stanley, Merrill Lynch, UBS Securities, Fidelity Brokerage Services, Charles Schwab & Co., Well Fargo Advisors, TD Ameritrade, ING Financial Partners, LPL Financial, Commonwealth Financial Network, MML Investor Services, Investors Capital Corp., Signator Investors, Meyers Associates and WFG Investments.

Galvin noted that “being included on the list is not an indication of wrongdoing at this time.”

The alternative investments under Galvin’s radar include REITs, oil and gas partnerships, private placements under Rule 506, structured products, tenancy-in-common and other securities carried on the broker dealers’ nontraditional product platforms.

These products “are attractive to seniors as they provide a return considerably higher than that of traditional investment options,” he said.