WASHINGTON, D.C. (September 23, 2015) – The North American Securities Administrators Association (NASAA) today announced LPL Financial LLC and the NASAA Non-Traded REIT Task Force have concluded a settlement in connection with an investigation of LPL’s failure to implement an adequate supervisory system regarding its sale of non-traded REITS and its failure to enforce its written procedures regarding the sale of non-traded REITS.
Under the terms of the settlement, Boston-based LPL agreed to remediate losses for all non-traded REITS sold by the firm from January 1, 2008 through December 31, 2013 in violation of prospectus standards, state concentration limits or LPL’s own guidelines. LPL agreed to retain an independent third party to review and verify its executed sales transactions for violations during this period, believed to be more than 2,000. LPL will make offers of remediation upon completion of the third-party review.
The settlement is the result of a multi-state investigation of the firm led by the Nevada Secretary of State Securities Division.
“The Task Force’s investigation is representative of the aggressive and coordinated enforcement actions of state securities regulators and demonstrates the important investor protection role states serve in safeguarding investors nationwide,” said William Beatty, NASAA President and Washington Securities Director.
The investigation concluded that LPL, through its agents, sold non-traded REITS in excess of the REIT’s prospectus standards, various state concentration limits or LPL’s Alternative Investment Guidelines. The investigation also found that LPL failed to implement a supervisory system that was reasonably designed to achieve compliance with state law.
In addition to remediating investor losses, LPL also agreed to pay civil penalties of $1.425 million to be distributed among 48 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The firm reached a separate settlement with Massachusetts securities regulators in 2013 and faces a separate action by New Hampshire securities regulators.
Beatty noted that during the negotiations regarding a penalty amount, the Task Force took into consideration LPL’s attempts to identify sales transaction violations, its efforts in contacting certain states to self-report violations, its efforts to improve its supervisory system, and its cooperation with the Task Force.
Beatty thanked securities regulators from Nevada, Maine and Texas for negotiating the settlement with LPL. He also thanked members of the NASAA Non-Traded REIT Task Force for their assistance in reaching today’s settlement and for their ongoing efforts. The Task Force includes securities regulators from California, Colorado, Maine, Nevada, Ohio, South Carolina, Texas and Virginia.
NASAA is the oldest international organization devoted to investor protection. Its membership consists of the securities administrators in the 50 states, the District of Columbia, Puerto Rico, the U.S. Virgin Islands, Canada and Mexico.
For More Information:
Bob Webster | Director of Communications