LPL Financial has faced significant regulatory penalties related to its non-traded Real Estate Investment Trust (REIT) sales practices. According to the North American Securities Administrators Association (NASAA), LPL engaged in widespread problematic sales activity across the country.
What Regulators Found
"LPL, through its agents, sold non-traded REITS in excess of the REITs prospectus standards, various state concentration limits or LPL's Alternative Investment Guidelines."
"LPL failed to implement a supervisory system that was reasonably designed to achieve compliance with state law."
Settlement Details
LPL agreed to the following terms to resolve the regulatory action:
- $1.425 million in civil penalties distributed among 48 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands
- Full remediation of investor losses stemming from the violations
- Strengthened supervisory systems to prevent future violations
This settlement followed a separate 2013 enforcement action by Massachusetts securities regulators and additional action from New Hampshire authorities — indicating a pattern of systemic supervisory failures at LPL.
What Are Non-Traded REITs?
Non-traded REITs are real estate investment trusts that are not listed on a public stock exchange. They are illiquid, complex products that carry significant risks including:
- Limited liquidity — investors typically cannot sell their shares on an open market
- Lack of transparency relative to publicly traded securities
- High upfront fees and commissions that reduce actual investment value
- Concentration risk when purchased in excess of state or prospectus limits
How to Recover Your Losses
Investors who experienced losses from non-traded REIT investments through LPL Financial may be able to pursue recovery through FINRA arbitration or securities litigation. Contact Jeff Salas at 312.803.4963 for a free portfolio review.