Five Brokerages Fined $9.6 Million For Alleged Improper Non-Traded REIT Sales

Massachusetts securities regulator William Galvin today announced settlements with five leading stock brokerages to make $8.6 million in restitution to investors and pay fines totaling $975,000 in connection with charges that the five firms engaged in improper sales of non-traded REITs to investors.

The five firms that settled with Massachusetts are Ameriprise Financial Services Inc., Commonwealth Financial Network, Royal Alliance Associates Inc., Securities America Inc., and Lincoln Financial Advisors Corp.

“Our investigation into the sales of REITs, triggered by investor complaints, showed a pattern of impropriety on the sales of these popular but risky investments on the part of independent brokerage firms where supervision has historically been difficult to monitor,” Mr. Galvin said in a statement.

Reportedly, many seniors are being persuaded to invest in non-traded REITs but are not being made aware of the risks and illiquidity of these products. According to securities fraud attorneys, many brokers and advisers with full-service brokerage firms may be tempting senior investors with promises of better returns while failing to adequately disclose the risks. Many retirees have a low risk tolerance and want conservative, income-producing portfolios and are attracted by brokers’ promises of a steady stream of distribution income from non-traded REITs. What brokers and advisors often times do not disclose is that distributions may be suspended or stopped completely. Another problem retirees face with REITs is that they may need access to their funds, but many non-traded REITs have suspended redemptions, leaving investors with limited options in the event that they need to sell REIT shares to access their funds.]

“The enforcement section’s investigation revealed significant and widespread problems with the firms’ compliance with their own policies, practices and procedures rules and adherence with Massachusetts prospectus requirements leaving investors often trapped in illiquid and underperforming financial products,” according to a statement by the Massachusetts Securities Division.

If you or a loved one suffered significant losses as a result of the unsuitable recommendation by any advisor to invest in non-traded REIT, 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 for a no-cost, confidential consultation.