The Financial Industry Regulatory Authority (FINRA) has issued a nearly $1 million fine to LPL Financial for its failures related to the supervision of sales in a broad range of alternative investment products, including nontraded REITs.
“The integrity of our financial markets of the highest importance,” commented Peter Mougey, a shareholder with the Levin, Papantonio law firm and Director of the firm’s Securities and Business Litigation Department. “The failure to properly supervise the sale of products like nontraded REITs cannot go without punishment.”
Nontraded REITs, or nontraded real estate investment funds, are the subject of wider controversy. Nontraded REITs often carry exorbitant fees and costs while simultaneously failing to disclose their true value to investors.
The recent fine stems from a controversy that began in December of 2012 when Massachusetts Secretary of the Commonwealth, William Gavin, sued LPL Financial for the way its brokers handled REITs. According to his allegations, the company failed to properly supervise its registered representatives during the sale of nontraded REITs – a violation of state law.
The company has previously agreed to pay $4.8 million in restitution to clients.
LPL was also fined $7.5 million for 35 separate failures related to its email system, in March of last year.