A Massachusetts lawsuit against LPL Financial will surely strengthen investors' arbitration claims for losses resulting from illegal sales practices involving real estate investment trusts (REITs). Massachusetts Secretary of the Commonwealth William Galvin charged LPL with failure to supervise registered representatives who sold the non-traded REITs in violation of both state limitations and the company's guidelines. The Massachusetts securities division also charged LPL with dishonest and unethical business practices. Massachusetts charges stem from the sale of $28 million of non-traded REITs to almost 600 clients from 2006 to 2009. Of the REITs listed in the complaint, the highest sales were for Inland American Real Estate Trust, the largest non-traded REIT, with $11.2 billion in real estate assets. Robert Pearce, a 30-year securities and commodities attorney in Boca Raton, FL, believes that Massachusetts' action will certainly generate a flood of cases against LPL. Mr. Pearce added that the Massachusetts complaint will serve as a roadmap for investors and their attorneys to follow when asserting their claims.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for long periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Non-traded REITs are not listed or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Non-traded REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factors associated with them.
In LPL's case, Massachusetts' investigation showed significant and widespread issues with LPL's adherence to product prospectus and state requirements. As a result, Massachusetts is seeking full restitution to clients who were sold REITs allegedly in violation of state and prospectus requirements. The state is also seeking an unspecified administrative fine against LPL. Although LPL set forth stringent requirements for the sale for non-traded REITs, it failed to properly review sales of non-traded REITs. In addition, the securities division was able to uncover similar issues with many other REITs sold by LPL. To counter the possibility of future violations, the firm has changed its policies and procedures, creating a separate complex-products team to review all alternative investments. Regardless of the measures taken by LPL, investors are urged to conduct their own investigation prior to making an investment decision involving non-traded REITs. That way, investors will have a clearer understanding of non-traded REITs, which just might keep them from buying the product from the get-go.
Have you suffered losses in real estate investment trusts sold by LPL Financial? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.