The New Hampshire regulator commenced its investigation into LPL’s sale of non-traded REITs to investors when an elderly client complained about losses tied to an initial investment of $253,000. According to sources, the female client was over 70, and her liquid net worth was $2.5 million at the time of the investment. The client lost almost her entire investment of $253,000 when her investments went south. New Hampshire securities 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’s policies and procedures regarding the sale and suitability of non-traded REITs to elderly investors is a fairly complex process. The aforementioned policies and procedures must take into consideration age, investment objectives and other factors, including a client’s current holdings in alternatives. Non-traded REITs are illiquid, and therefore cannot be included in the client’s liquid net worth, but instead, must be included in the client’s alternative investment holdings. LPL maintained a policy whereby clients over 70-years-old could not hold alternative investments that exceeded 15% of their liquid net worth.
The New Hampshire regulator found roughly 48 of the sales made by LPL advisors led to a concentration in alternative investments that “blatantly exceeded LPL guidelines…These 48 unlawful and unsuitable sales totaled approximately $2.4 million.” Accordingly, the New Hampshire Deputy Director Jeff Spill said: “During the course of its investigation, the bureau determined that LPL sold hundreds of non-traded real estate investment trusts to New Hampshire clients, based on clearly erroneous client financial information and often in direct violation of LPL’s own policies.”
At this juncture, the New Hampshire Bureau of Securities Regulation’s suit against LPL merely consists of allegations and unproven facts. LPL has 30 days to request a hearing before a hearings officer at the Bureau of Securities Regulation in Concord. However, in the event the New Hampshire regulator’s allegations are proven true, then LPL could be required to satisfy the regulator’s $3.6M judgment request, as well as face potential civil liability from other aggrieved investors.
Lufrano Law, LLC is a national securities litigation firm and has experience representing investors who have investment disputes with brokers and broker-dealers. If you lost money investing in non-traded REITs through LPL, you may be able to recover your losses through FINRA arbitration. Our firm only receives a fee if you recover money. Please contact one of our attorneys at (800) 627-2179 to schedule a free consultation.