LPL Financial may ultimately repay $8 million to customers according to a settlement it reached with the New Hampshire Bureau of Securities regarding sales of non-traded real estate investment trusts. New Hampshire and LPL agreed to the settlement in December 2015. The case was initiated in reaction to a complaint from an elderly New Hampshire citizen who experienced massive losses after buying numerous of these REITs.
LPL paid a fine of $750,000 and offered to pay remediation to any New Hampshire client who was sold a nontraded REIT since 2007 if the sale exceeded LPL’s rules or product specific restrictions. As part of the agreement, LPL had to hire a third-party to go over its nontraded REIT sales to figure out whether they violated their own rules.
This third-party recently finished its evaluation and decided the more than two hundred New Hampshire citizens were eligible for remediation of about eight million dollars, which is roughly $40,000 per customer. The $8 million number is the total purchase price of the shares of nontraded REITs that were purchased by the customers. Those who still have their shares would have to tender them back to LPL to receive their amount of the funds. All of these customers will get letters describing the offer being made by LPL as well as the terms of accepting it.
LPL has been faced with several expensive compliance issues of the last few years. In January, Massachusetts regulators ordered it to pay $3.7 million in client restitution and fines resulting from an investigation into sales of unsuitable variable annuities by a former Boston advisor. In 2014 and 2015, LPL paid over $70 million in regulatory fines and restitution to clients. It has also accumulated millions of dollars in fines and payments to clients regarding sales of nontraded REITs, a high commission product disfavored as the industry conforms to the DOL’s fiduciary rule for retirement accounts.
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