LPL Financial

Published on: October 29, 2012

Recovery of Inland Western REIT Losses

Earlier in October, another claim was filed in an effort to help investors recover REIT losses. This claim was against LPL Financial and its goal is to recover losses sustained in Retail Properties of America, formerly known as Inland Western Real Estate Investment Trust. This claim, which was filed with FINRA, also involves eight other alternative, illiquid investments, and is seeking $1,000,000 in damages.

Recovery of Inland Western REIT Losses

Typically, REITs carry a high commission which motivates brokers to make the recommendation to investors despite the investment’s unsuitability. The commission on a non-traded REIT is often as high as 15 percent. Non-traded REITs carry a relatively high dividend or high interest, making them attractive to retired investors. However, non-traded REITs are inherently risky and illiquid, which limits access of funds to investors. In addition, frequent updates of the investment’s current price are not required of broker-dealers, causing misunderstandings about the financial condition of the investment. Because frequent updates are not required, investors may believe the REIT is doing much better than it actually is.

Reportedly, LPL Financial and its advisor, used an over-concentration of illiquid investments in the client’s portfolio. Furthermore, these investments carried a high level of risk because the securities recommended to the claimant didn’t trade freely. In addition to the Inland Western REIT, the portfolio also consisted of KBS REIT, Inland American REIT, LEAF Fund, Hines REIT, Atlas, ATEL Fund X, PDC 2005A, and ATEL Fund XI

Published on: September 28, 2012

TIC Investor Losses Could be Recovered in FINRA Arbitration

by InvestorLawyers

Securities arbitration lawyers are currently investigating claims on behalf of investors who suffered significant losses as a result of their investment in TIC, or tenants-in-common, investments with a full-service brokerage firm. The securities industry has watched as TICs have become more common as a result of the IRS rules amendment in 2003, allowing an avoidance in capital gains taxes to investors who invested their property sale proceeds into TIC investments.

TIC Investor Losses Could be Recovered in FINRA Arbitration

According to stock fraud lawyers, following the crash of the real estate market, many TIC investors, as fractional owners in a single property, saw a significant decline in the value of their investment. However, because of the sales practices of some FINRA registered brokerage firms, some of these investors may be able to recover losses through securities arbitration. These products were often represented as “guaranteed” and/or “safe” investments that would return between 7 and 12 percent each year. However, in many cases, investors were not properly advised on the risks associated with TIC investments.

A Financial Industry Regulatory Authority panel has already ordered one firm, LPL Financial, to reimburse investor losses amounting to $1.4 million in Braintree Park LLC and Heron Cove LLC. These two TICs were sponsored by Direct Invest LLC.

Published on: April 4, 2012

Victims of LPL Financial Advisor Could Recover Losses

by InvestorLawyers

Victims of Elliot Kravitz, an LPL Financial Corp. independent client investment representative, are seeking the help of investment fraud lawyers in recovering their losses. Kravitz pleaded guilty recently to one count of wire fraud, according to the Cincinnati Business Courier. The wire fraud was in connection with an investment scheme. In this scheme, nine of Kravitz’ customers were defrauded out of over $2 million.

Victims of LPL Financial Advisor Could Recover Losses

Kravitz sold securities through LPL Financial Corp., which was formerly Waterstone Financial Corp., according to the plea agreement. In accordance with Kravitz’ recommendation, a client pulled money out of the stock market in order to invest in a REIT, or real estate investment trust, in July 2007. In order to gain permission to move the money, Kravitz had the client sign a distribution form. However, Kravitz placed the money in an account under his control instead of investing it in the REIT. Kravitz then made 12 additional withdrawals from the client’s account, totaling $713,765. The client then received a year-end account portfolio statement from Kravitz that listed the fake REIT. Allegedly, Kravitz diverted funds from eight other clients as well, amounting to approximately $1.12 million, for personal use.

According to securities arbitration lawyers, a firm may still be held responsible for investment losses if it can be proved that they were negligent in the supervision of their brokers, even if the broker or advisor was conducting business without their knowledge. Therefore, victims of Kravitz’ fraud may be able to recover losses with the help of an investment fraud lawyer, through securities arbitration against LPL Financial.

Published on: March 30, 2012

Victims of Former LPL Financial Representative, Arthur Lin, Could Recover Losses

by InvestorLawyers

Securities arbitration lawyers are currently consulting with investors who suffered losses because of their association with Arthur Lin. A former LPL Financial representative, Lin has been accused of selling “…$5,360,000 in unregistered promissory notes issued by Malarz Equity Investments LLC to at least 20 investors, including 15 LPL customers,” according to Securities and Exchange Commission documents. Lin was registered with the Financial Industry Regulatory Authority (FINRA) member firm LPL Financial; investors who suffered losses during the time he was registered may be able to recover their losses through FINRA arbitration.

Victims of Former LPL Financial Representative, Arthur Lin, Could Recover Losses

According to the SEC, Lin was permanently enjoined from future violations of federal securities law on January 25, 2012. Between September 2006 and December 2008, Lin allegedly sold unregistered promissory notes to LPL Financial clients. Some fraudulent promissory notes should be registered with applicable regulatory bodies but, instead, bypass registration. Unregistered promissory notes that should have been registered are in violation of federal securities laws and victims of this fraud may be able to recover losses through securities arbitration.

Furthermore, according to the complaint, “Lin knowingly or recklessly made material misrepresentations or omitted to state material facts to investors regarding the risks of the investments and the use of investor funds,” according to the SEC.

Published on: March 2, 2012

News: FINRA Files Complaint Against Ex-broker

by InvestorLawyers

On February 9, 2012, ex-broker James Scott McKee was charged with aggravated theft in the first degree. As a result of his broker misconduct, McKee faces four charges of theft. In addition, a complaint has been filed against him with the Financial Industry Regulatory Authority (FINRA). McKee was formally affiliated with LPL Financial LLC, Morgan Stanley Smith Barney LLC and Berthel Fischer & Co. Financial Services Inc. According to the complaint filed with FINRA, McKee’s victims included a local church, an 81-year-old retiree and other unsophisticated investors.

McKee convinced an LPL client to invest $400,000. This investment took place in April 2007 and was put into a real estate venture. However, according to the FINRA complaint, McKee failed to notify or receive approval from LPL for the venture. Following a heart attack, which subjected the investor to significant medical expenses, she contacted McKee to have her money returned. McKee received two checks for $200,000 in February 2008 but failed to return the money to the investor. Instead, he told the client the funds remained invested and then used them for his own use. The money has not yet been returned to the client.

According to the police statement on the matter, McKee “committed aggravated theft by deception and fraud with respect to securities or securities business” from February 2008 to the present. According to Oregon officials, McKee sold unregistered securities, conducted unauthorized liquidation of investment account monies, concealed the liquidation and made an unauthorized deposit of said funds into his personal bank account.

Published on: February 29, 2012

Investors Recovering TIC Investment Losses Through Securities Arbitration

by InvestorLawyers

There has been a recent series of Financial Industry Regulatory Authority (FINRA) securities arbitration rulings in which panels have sided with investors who sustained losses because of TIC exchanges. TIC, or tenant-in-common, investments involve tax-deferred exchanges of property ownership interests. In the majority of these arbitration awards, the sale of TICs, along with other products, came from DBSI Inc. DBSI raised almost $1 billion from around 140 separate deals prior to its bankruptcy declaration in 2008.

Investors Recovering TIC Investment Losses Through Securities Arbitration

Securities Arbitration Commentator research and InvestmentNews reports indicate that $12.6 million in cases involving DBSI’s direct broker-dealer sales of TICs have been filed with FINRA.

LPL Financial LLC has also faced a FINRA panel because of TIC investments. Heinrich and Araceli Hardt, both 76 from San Diego, California, purchased two TIC exchanges from David Glenn, an LPL broker. According to the Hardts’ allegations, LPL and Glenn’s broker misconduct included elder abuse and securities fraud. On February 10, the FINRA panel awarded the Hardts $1.4 million. Claims were also filed on behalf of the Hardts against Orchard Securities LLC and Meridian Capital Partners. However, the claims against Meridian Capital and Orchard Securities were dismissed by the Hardts in December.

Published on: February 27, 2012

LPL Financial Investors of Direct Invest LLC May Be Eligible to Recover Losses Through Securities Arbitration

by InvestorLawyers

Investment attorneys are investigating claims on behalf of investors against LPL Financial regarding the sale of private placements. The many investors who sustained losses in private placements, specifically Direct Invest LLC, may be able to recover losses through securities arbitration. Earlier this month, a Financial Industry Regulatory Authority Arbitration Panel awarded two LPL investors $1.4 million as a result of losses they sustained from Direct Invest LLC. Their investments included Braintree Park LLC and Heron Cove LLC. In addition to the $1.4 million award, LPL was also ordered to pay hearing session fees totaling $35,700.

LPL Financial Investors of Direct Invest, LLC may be Eligible to Recover Losses Through Securities Arbitration

According to claimants’ allegations, LPL’s sale of investments in Direct Invest LLC was fraudulent in that the investments were marketed as private placements to retirees, promising that the investments could generate a consistent income stream. Claimants alleged that the sources of the projected distributions, the real estate market and the actual properties were misrepresented by LPL. Furthermore, claimants stated that they were told that their received distributions would come from real estate operations while, in actuality, a large part of the distributions came from the use of leverage or a return of their own investment.

The original FINRA claim also named Meridian Capital Partners LLC and Orchard Securities LLC as respondents. However, the claims against these firms were resolved with claimants prior to the FINRA panel’s ruling. Therefore, details of how the issues were resolved are not present in this case.

Published on: December 14, 2011

Customers of LPL Financial, Jack Kleck May Have Valid Securities Arbitration Claim

by InvestorLawyers

Stock broker fraud lawyers are investigating potential securities arbitration claims against LPL Financial and Jack Kleck, a former LPL broker. LPL Financial was fined $100,000 in late November for failure to adequately supervise Kleck. LPL was fined by the Oregon Department of Consumer and Business Services.

Customers of LPL Financial and Jack Kleck May Have Valid Securities Arbitration Claim

Kleck, who was LPL Financial’s branch manager in La Grande, “sold investments in high-risk oil and gas partnerships to nearly three dozen Oregon residents, including many elderly people,” according to the State of Oregon. In addition, Kleck’s recommendations were unsuitable for his clientele and were not in keeping with their age and investment objectives. The State of Oregon stated, “Many of Kleck’s clients were in their 70s and 80s, and some were not capable, due to poor health, of making sound investment decisions.” According to Oregon’s decision, LPL violated securities laws including failure to supervise and failure to properly enforce company policies and procedures.

By law, broker-dealers must make “suitable” recommendations to their clients. Under FINRA Rule 2111, brokers are required to consider investment objectives, tax status, financial status, age, risk tolerance, time horizon, liquidity needs, other investments and experience when determining if a recommendation is a suitable investment for a client. For example, broker-dealers handling a customer’s conservative investment portfolio may not recommend high-risk investments that are not in keeping with the customer’s investment objectives. For more on the suitability standard, see the previous blog post, “FINRA Revises Suitability Rule 2111.”

Published on: October 12, 2011

The Risks of Self-directed IRAs

by InvestorLawyers

The North American Securities Administrators Association Inc. and the Securities and Exchange Commission issued an investor alert on September 23, which warned of the risks of self-directed IRAs. According to InvestmentNews.com, this scrutiny by regulators will likely influence the implementation of tougher restrictions on self-directed IRAs by small- to mid-sized broker-dealers.

THE RISKS OF SELF-DIRECTED IRAs

According to Brad Borncamp, a certified public accountant, “IRAs have a specific purpose: long-term investment for retirement. It’s really easy to mess up these transactions, and there’s more than meets the eye.” Self-directed individual retirement accounts allow their owners to invest in more unusual investment vehicles such as raw real estate, limited partnerships, private placements and life settlements. This is in contrast to traditional IRAs, which are usually limited to mutual funds, stocks and bonds. According to NASAA, about 2 percent of the total IRAs, or $94 billion, is estimated to be self-directed.

Because self-directed IRAs’ owners are able to hold unregistered securities, due diligence is often neglected by custodians. In addition, early withdrawals come with a penalty that encourages money to remain tied up in them longer, making these investments a frequent vehicle for stock broker fraud. Although up until now, smaller broker-dealer firms have resisted giving up the higher profit margins associated with self-directed IRAs, they will soon be following in the footsteps of their larger counterparts because of recent developments.