Five Brokerage Firms Pay Investors $10.8 Million After Massachusetts Probe

   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 [e-mail]

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