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Articles Tagged with Royal Alliance

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Broker dealers that sold funds offered by GPB Capital Holdings LLC (“GPB”) have collectively been paid $167 million in commissions, according to a report from the publication Investment News.  This sum represents 9.3% of the $1.8 billion that investors paid for these risky private placements, which are offered under SEC regulations allowing the sale of private placements to certain so-called accredited investors that meet certain minimum thresholds for income and/or net worth.

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While brokers and broker-dealers theoretically are allowed to collect as much as 10% in commissions for selling private placements and other non-traded securities to clients, very few investments pay such a high rate.  Some sponsors of private placements like GPB Capital induce brokers and their firms to sell such risky investments by offering much higher commissions and fees that are commonly available elsewhere.

It is not uncommon for individual financial advisors and stockbrokers to earn around 7% in commissions for selling private placements and other illiquid investments- with another 2% going to the brokerage firm.   However, what is common in the private placement world as far as commissions, is extremely high compared with commissions payable to brokers for selling conventional investments.   Mutual funds and other similar investments typically pay less than half as much in commissions as private placements.

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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.

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