LPL Financial with over 16,000 representatives announced they are halting non-traded REIT sales after many lawsuits and complaints. While the firms likely believe this temporary halt of sales is not a repeat of past mistakes like the ongoing sales that took place for many during the 2008-2009 financial crisis, the criticism here is that this is all just window-dressing as it is too little being done too late. Some of the explanation is that the Covid-19 issues are causing difficulties in real estate valuations, but that may be the tip of the iceberg here.
The lack of transparent pricing has not stopped the financial advisors from selling billions of dollars of these securities, often in the firm of non-traded REITs to investors. In some instances, those sales are unsuitable, the products and underlying investments are misrepresented, and investors (some retired or elderly) find themselves with illiquid, risky investments they cannot even understand.
LPL Complaints and Lawsuits
LPL Financial has a history of REIT-related issues and complaints:
- LPL Financial LLC, according to FINRA Brokercheck has 236 separate disclosures (176 of them regulatory disclosures, several specifically relating to sales of non-traded REITs:
- In 2013, LPL Financial was fined by Massachusetts Securities Regulators related to REIT sales.
- In 2015, LPL Financial was the subject of a case brought by the New Hampshire securities regulators involving REIT sales. Also in 2015, LPL Financial entered an Acceptance, Waiver & Consent (AWC) that neither admitted nor denied the allegations, which related to (among other issues) sales practice issues of non-traded REIT investments. LPL Financial was censured and fined $10 million by securities regulators.
- That came on the heels of another FINRA AWC in 2014 that resulted in a fine and included allegations related to non-traded REIT transactions and inadequate supervisory procedures.
- In 2017, LPL Financial caught the eye of securities regulators in other states such as New Jersey arising from LPL Financial’s failure to properly supervise sales of illiquid alternative investments to customers, including non-traded REITs and non-traded BDCs. In 2018, one of the LPL Financial regulatory disclosures noted above specifically relates to sales of non-traded REITs and issues with the North Carolina, District of Columbia and alleged failure to implement an adequate supervisory system and enforce its procedures regarding the sales of non-traded REITs. In 2017, another regulatory disclosure involves the State of Virginia Maine, and in the State of Vermont.
- In 2016, there were similar issues in the State of Montana, State of Hawaii, and State of Louisiana, Wyoming, Oklahoma, Oregon, South Carolina, Arkansas, Ohio, Tennessee, Wisconsin, U.S. Virgin Islands, Kentucky, Alabama, North Dakota, Kansas, Washington, California, Colorado, Florida, Iowa, Michigan, Minnesota, Nebraska, Georgia, Idaho, Mississippi, Puerto Rico, New Mexico, South Dakota, Indiana, Texas, Alaska, Missouri, Utah, Pennsylvania, Nevada and in State of Maryland (as part of a multistate task force investigation with the North American Securities Administrators Association, Inc. (NASAA) regarding the sales of non-traded REITs. LPL Financial neither admitted nor denied the findings of fact and conclusions of law contained in a Consent Order.
Tom, aka T Rex, is seasoned financial pro that cut his teeth on the Chicago trading oil futures in 1995. He has bachelor’s degree in finance and management. In less than 3 years he bought his own seat and set up shop on the exchange. For the next 10 years Rex traded his own account and some institutional accounts. In 2017, he decided to move to Florida and focus on educating traders and writing for financial websites.