New Hampshire securities regulators want
LPL Financial to shell out $3.6 million in fines and repayments to investors for allegedly unsuitable sales of real estate investments to elderly clients.
In an
action filed Monday, the New Hampshire Bureau of Securities Regulation said it is seeking $2.4 million from LPL in buybacks and restitution for clients in 48 sales of nontraded real estate investment trusts that date back to 2007. It also is imposing a $1 million fine and asking LPL to pay $200,000 in investigative costs.
The state alleges the sales were “unsuitable and unlawful” and that LPL failed to supervise its agents.
The case stems from an 81-year-old New Hampshire resident who bought a nontraded
REIT from LPL in January 2008 and subsequently lost a substantial amount on the product, which typically is illiquid and comes with high fees.
(Related: Analysts question whether LPL is out of the regulatory woods)
The client invested $253,000 in the REIT and had a liquid net worth of $2.5 million. New Hampshire said that investment, and many others, caused elderly clients to hold a higher percentage of their portfolios in risky alternative investments than is allowed by LPL's internal rules.
The 48 REIT sales that totaled approximately $2.4 million “resulted in an [alternatives] concentration that blatantly exceeded LPL guidelines,” the New Hampshire securities bureau wrote in its petition. It received the initial complaint in the fall of 2013.
LPL will request a hearing in front of a bureau hearing officer, according to LPL spokesman Brett Weinberg. A final decision has not yet been made in the case.
LPL was “unable to reach a mutually agreeable resolution” with the state, Mr. Weinberg said in a statement. “LPL has dedicated substantial resources to addressing these legacy issues and enhancing our practices around the sale and supervision of alternative investments.”
Adrian LaRochelle, a staff attorney in the New Hampshire securities bureau, said the agency has been talking to LPL throughout the investigative process.
“We believe there's a serious enough problem that a hearing is necessary,” Mr. LaRochelle said.
