BOSTON May 22 Five independent broker-dealers
will pay at least $9.6 million in fines and restitution to
settle what Massachusetts' top securities regulator has called
their improper sales of non-traded real estate investment
trusts, or REITs.
In a statement on Wednesday, Massachusetts Secretary of the
Commonwealth William Galvin said the firms include Ameriprise
Financial Services, the broker-dealer arm of Ameriprise
Financial Inc ; Commonwealth Financial Network; Royal
Alliance Associates; Securities America and Lincoln Financial
Galvin said investor complaints led to an investigation that
uncovered "a pattern of impropriety in the sales of these
popular, but risky investments on the part of independent
brokerage firms where supervision has historically been
difficult to maintain."
REITs invest in commercial real estate, such as hotels and
strip malls, allowing investors to profit from rising property
values. Nontraded REITs, which do not trade on securities
exchanges, can be illiquid or difficult to sell in secondary
markets and often carry higher fees.
In February, Galvin's office settled a similar matter with
LPL Financial Holdings Inc, alleging it failed to
properly supervise brokers who sold non-traded REITs.
Brian McNiff, a spokesman for Galvin, said on Wednesday LPL
had paid an additional $2.6 million in restitution, bringing its
total payments under the settlement to more than $5 million.
"We're pleased to resolve this matter, which affected only a
small number of transactions during the 2006-2008 time period,"
Ameriprise said in a statement.
It has since implemented a centralized system to review
transactions, the company said.
Massachusetts' Chief Compliance Officer Paul Tolley said in
statement that the settlement related to 42 transactions over a
"(W)e continue to take seriously our responsibility to
protect investors' interests," he said.
Janine Wertheim, senior vice president for Securities
America, said in a statement: "We have enhanced our procedures
for monitoring these types of transactions and are pleased to
have resolved this matter."
A spokesman for Lincoln Financial, Michael Arcaro, said via
email that it accepted factual findings of Galvin's review,
"including the inadvertent approval of sales that exceeded the
Massachusetts prospectus requirement." It will offer to
repurcahse shares from the eight clients it currently knows are
affected by the matter, he said.
Representatives for Royal Alliance did not return messages.