Massachusetts securities regulators have fined Next Financial Group $150,000 over unsuitable sales of nontraded real estate investment trusts to elder investors and related supervisory failures.
In addition to the fine, the consent order requires the Houston-based independent broker-dealer to offer restitution to the Massachusetts residents who were sold unsuitable investments.
The Massachusetts Securities Division opened an investigation after receiving a complaint in July 2017 from a retired veteran who had been sold annuities and nontraded REITs, despite his expressed desire for “conservative investments.”
The regulators then discovered multiple sales of nontraded REITs that exceeded Next’s guidelines for the concentration of a client’s liquid net worth in alternative investments.
Over a period of nearly six years, Next processed many transactions that topped these guidelines, the consent order states. In addition, regulators uncovered sales of nontraded REITs to investors over age 80, contrary to the independent broker-dealer’s supervisory procedures.
(Next was bought by Atria Wealth Solutions in January, when it had some 500 advisors and $13 billion in assets under administration.)
The client who contacted regulators said he did not fully understand the nature of the alternative investments sold to him by a representative of Next (who was not identified by name). He and other clients completed an alternative investment disclosure form.