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April 07, 2015 at 04:11 PM
New Hampshire regulators have taken legal action against LPL Financial (LPLA) in an effort to win a $3.6 million judgment over nontraded REIT sales to an elderly investor and the broker-dealers alleged failure to consistently supervise such sales. The state is asking for restitution of $2.4 million, as well as a $1 million fine and repayment of $200,000 to cover the costs of its investigation costs.
The New Hampshire Bureau of Securities Regulation began work on the matter in early 2008, after an older client complained about losses tied to an initial investment of $253,000. At the time of the investment, the client was over 70, and her liquid net worth was $2.5 million.
The state’s regulators then began an investigation of and found that “LPL had made numerous sales of nontraded REITs to New Hampshire investors that violated New Hampshire securities law and LPL’s guidelines on [Alternative Investments or] AI concentration,” according to a court order.
LPL claimed only 10 sales made since 2007 were unsuitable, and the bureau pursued further investigation.
The regulators found that “LPL not only violated its own [written standard procedures] and AI Concentration caps on numerous occasions, but also that LPL’s WSPs and supervisory systems as they relate to the sale of nontraded REITs were systematically flawed, resulting in hundreds of unlawful or unsuitable nontraded REIT sales to New Hampshire investors.”
LPL, which has 30 days to request a hearing on the matter, says it “regrets that we were unable to reach a mutually agreeable resolution.”
The broker-dealer notes in a statement that it has “dedicated substantial resources to addressing these legacy issues and enhancing our practices around the sale and supervision of alternative investments. We take the protection of investors’ interests seriously, and remain committed to ensuring investors in the state of New Hampshire and elsewhere are treated fairly.”
