Regulator: LPL's Non-Traded REIT Were Improper

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REIT Wrecks
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Regulator: LPL's Non-Traded REIT Were Improper

Post by REIT Wrecks » Thu Dec 13, 2012 3:56 am

The Commonwealth of Massachusetts has charged LPL Financial with a variety of violations related to sales of certain non-traded REITs, including failure to supervise brokers who allegedly sold non-traded REITs in violation of both state limitations and the LPL's own rules. The Division also charged LPL with dishonest and unethical business practices.

According to the complaint, of the 597 transactions that were reviewed, 569 were found to have regulatory violations. These violations include (1) sales made in violation of Massachusetts 10% concentration limitations, (2) sales made in violation of prospectus requirements and (3) sales made in violation of LPL compliance practices.

The complaint said that non-traded REITs were an "especially risky" investment vehicle and that the non-traded REIT structure is "rife with conflicts." The complaint also stated that LPL's problems with the sale of these vehicles were significant and widespread, The violations involved sales of Inland American, Cole II, Cole III, Cole 1031, Wells II, CPA 17 and Dividend Capital Total Realty Trust.

“Non-traded REITs present risks to investors,” said Secretary Galvin. “Massachusetts recognizes those risks and requires limits on an investors' exposure to the high fees, potential illiquidity, and risky nature of non-traded REIT products. In addition to the Massachusetts rules, the non-traded REIT prospectus contained liquid net worth, net worth, and annual income limitations.”

“Writing those investor protection provisions into the prospectus means little if the representatives selling the investment ignore the restrictions imposed by state limitations as well as the company's own rules,' Galvin said.

You can read the full [url=]LPL complaint here[/url].

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Re: Regulator: LPL's Non-Traded REIT Were Improper

Post by CAPT_DOMM » Tue Jan 22, 2013 1:39 pm

I think this will wrap up quickly. Most of the REITs listed are going to provide significant returns to investors. It sounds like advisors in MA were probably selling REITs as "CD alternatives" and did not disclose the liquidity and risk associated with the REITs. Be wary of many of the advisors that sit in bank branches. Many are young and are told to push a product. They do no research of their own and know very little about a client before making recommendations. REIT can be used for some people but not for everybody.

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