On Wednesday, LPL agreed to pay $750,000 to settle charges related to the sale of nontraded real estate investment trusts (REITs) to an 81-year-old investor in New Hampshire. The state claims that the sale of the REITs was unsuitable and unlawful. The Bureau of Securities Regulation says the broker-dealer sold unsupervised nontraded REITs to the investor and this resulted in losses that were significant. For this, LPL was fined $750,000. Nontraded REITs can be very risky investments and are not suitable for every investor. When recommending a security, the broker must take into account the customer’s age, net worth, investment portfolio and investment objectives. If he does not, his brokerage firm can be held liable for investment losses, as they had a duty to reasonably supervise him while he was employed there. LPL settled a $1.43 million multi-state case brought by the North American Securities Administrators Association for certain nontraded REIT sales and inadequate supervision of the transactions. The firm also agreed to pay $1.8 million in fines to Massachusetts and $200,000 in fines to Delaware for unsuitable sales of leveraged exchange-traded funds. Finally, in May, the Financial Industry Regulatory Authority (FINRA) ordered LPL to pay $11.7 million in fines and restitution for “widespread supervisory failures” related to the sale of its products.
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