Ameriprise Financial, Securities America, & Three Other Brokerage Firms Reach $9.6M Non-Traded REIT Securities Settlement with Massachusetts Financial Regulator
Secretary of the Commonwealth of Massachusetts William Galvin announced today that the state has reached a $9.6M securities settlement with five independent brokerage dealers—Ameriprise Financial Services Inc. (AMP), Commonwealth Financial Network, Lincoln Financial Advisors Corp., Royal Alliance Associates Inc., & Securities America Inc.—over the allegedly inappropriate sale of nontraded real estate investment trusts to investors. $8.6M of this is restitution to them.
Galvin says that the investigation, which was triggered by complaints from customers, led to the discovery of a “pattern of impropriety” in the sale of these securities by independent broker-dealers where supervision has been hard to “maintain.” As part of the nontraded REIT settlement, Ameriprise will pay $2.6 in restitution and a $400K fine, Securities America will pay $778K in restitution and a $150K fine, Royal Alliance will pay $59K in restitution and a $25K fine, Commonwealth Financial Network will pay a $2.1M restitution and a $300K fine, and Lincoln Financial will pay a $504K restitution and a $100K fine.
The non-traded REIT agreement with these independent brokerage firms comes just three months after Galvin settled a similar securities fraud case with LPL Financial Holdings Inc. accusing that financial firm of inadequately supervising their brokers tasked with selling the financial instruments. LPL Financial agreed to pay $2.5M in restitution and a $500K administrative fee over seven nontraded REITs that were sold.
The state of Massachusetts contends that some sales allegedly violated state regulations that don’t allow over 10% of an investor’s worth to be held in specific securities, while others purportedly violated the requirements for liquid net worth of investors that are established in prospectuses. Firm employees and brokers tasked with looking over the transactions were not only allegedly inadequately supervised, but also they lacked the necessary education about nontraded REIT transactions. This week, a spokesperson for Secretary Galvin announced that the financial firm has agreed to pay another $2.6 million in restitution.
Shepherd Smith Edwards and Kantas, LTD LLP’s REIT attorneys, represent individual and institutional investors throughout the United States.
Five IBDs in $7M settlement over nontraded-REIT sales, Investment News, May 22, 2013
LPL to pay up to $2.5 million to settle Massachusetts REIT charges, Reuters, February 6, 2013
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