LPL Broker Barred for Improper Non-traded REIT Sales; Customers Could Recover Losses

by InvestorLawyers on December 31, 2013

in Arbitration,FINRA,LPL Financial,REIT,Securities Fraud,Suitability

Securities fraud attorneys are investigating claims on behalf of customers who suffered significant losses in non-traded REITs as a result of doing business with Gary Chackman, an LPL Financial broker. In December, the Financial Industry Regulatory Authority barred Chackman for violating securities industry rules related to the sales of non-traded real estate investment trusts.

LPL Broker Barred for Improper Non-traded REIT Sales Customers Could Recover Losses

The alleged misconduct relates to the time period from 2009 to 2012, but Chackman was registered with LPL between 2001 and 2012. In 2012, his registration was terminated by the firm for violating the firm’s policies and procedures regarding alternative investment sales.

According to the letter of acceptance waiver and consent, Chackman “recommended and effected unsuitable transactions in the accounts of at least eight LPL customers, by overconcentrating his customers’ assets in [REITs] and other illiquid securities.” The letter, dated December 12, 2012, also states that by submitting falsified documents, Chackman “was able to increase his customers’ accounts’ concentration in REITs and other alternative investments beyond the allocation limits established by [LPL].”

Typically, non-traded REITs carry a high commission, often as high as 15 percent, which motivates some brokers to make unsuitable recommendations to their clients. Non-traded REITs are attractive to investors because they carry a relatively high distributions of cash representing income and/or return of capital.  According to stock fraud lawyers, however, these investments are inherently risky and illiquid because there is a limited market for reselling shares.  This illiquidity and volatility makes non-traded REIT shares unsuitable for many individuals with conservative risk tolerances and those who need easy access to funds, especially when their portfolios are over-concentrated in illiquid investments.

Reportedly, one of Chackman’s clients made seven $75,000 purchases of one non-traded REIT over a six month period. After a year, 25 percent of the client’s liquid net worth and 35 percent of her assets were invested in REITs and other alternative investments. Another client, who purchased the same REIT, made seven purchases over seven months totaling $135,000 and had over one-third of his liquid net worth invested in REITs and other alternative investments after about two years.

According to securities fraud attorneys, brokers firms have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. If a broker or firm fails to make suitable recommendations, investors may be able to recover losses through FINRA arbitration.

If you suffered significant losses as a result of doing business with Gary Chackman or received an unsuitable recommendation of non-traded REITs from another stockbroker or financial advisor, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.

Previous post:

Next post: