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.