By Matthias Rieker
Five brokerage firms will pay $10.8 million in a second round of
restitution to clients who were improperly sold non-traded real
estate investment trusts, Massachusetts' securities regulator said
Wednesday.
Securities America Inc., a unit of Ladenburg Thalmann Financial
Services Inc. (LTS), will pay $7.7 million; Ameriprise Financial
Inc. (AMP) $1.6 million; Lincoln National Corp.'s (LNC) Lincoln
Financial Advisors Corp. $840,873; Commonwealth Financial Network
$533,500; and American International Group Inc.'s (AIG) Royal
Alliance Associates $125,000.
The firms either declined to comment or didn't have any
immediate comment.
In May, Secretary of the Commonwealth of Massachusetts William
F. Galvin announced the five companies would pay nearly $1 million
in fines and $8.6 million in restitution, as a result of its
investigation into the sale of various REITs. As part of the
settlement Massachusetts ordered the firms to do a second round of
reviews of all REITs they sold to Massachusetts investors,
resulting in Wednesday's announcement. A sixth firm, LPL Financial
Holdings, agreed to pay $4.8 million earlier in the year.
In total, the six companies are returning $21.7 million to
investors, the Massachusetts regulator said.
"These investments are popular, but risky," Secretary Galvin
said in a media release about REITs, which are securities tied to
income-producing properties. "Our investigation showed widespread
problems with adherence to the firms' own policies" as well as
state rules, he said.
In July, Secretary Galvin launched a broader investigation into
brokerages' sales practices of so-called alternative investments to
seniors. "My office's recent REIT investigation has only heightened
my concern that the senior market place is being targeted for the
sales of these high-risk, esoteric products," he said.
Massachusetts sent subpoenas to the securities units of Morgan
Stanley (MS), Bank of America Corp. (BAC), UBS AG (UBS), Charles
Schwab Corp. (SCHW), Well Fargo & Co. (WFC), and LPL Financial,
among others.
Write to Matthias Rieker at matthias.rieker@wsj.com
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