LPL BROKERS SOLD UNSUITABLE INVESTMENTS, FAILED TO FOLLOW SUPERVISORY PROCEDURES
According to the Bureau, several LPL brokers recommended high concentrations of real estate investment trusts (REITs) in customers’ portfolios that were in clear violation of the REIT purchase limitations.
A REIT is a corporation, trust, or association that owns income-producing real estate. REITs pool the capital of numerous investors to purchase a portfolio of properties that the average individual investor may not otherwise be able to purchase themselves.
A nontraded REIT is a type of REIT that has no public trading market. As a result, they are illiquid investments and often have restrictions on early redemptions. Investors should be aware that investing in a nontraded REIT will limit their access to their investment funds for a lengthy time period, depending upon the terms of the investment.
In LPL’s case, the Bureau’s report revealed that LPL’s brokers ignored the nontraded REITs purchase limitations and caused customers to purchase more than was allowed and suitable for their portfolio. For example, the prospectus for a nontraded REIT described in the Bureau’s report only allowed a total investment of up to 10% of the investor’s liquid net worth. An LPL broker, however, recommended that a customer with a $350,000 liquid net worth purchase $69,000, or close to 20% of the customer’s entire liquid net worth, of non-traded REITS. In return, LPL received gross sales commissions of up to 10%.
LPL has a long history of fines and penalties for sales practice violations concerning its sale of nontraded REITs. For example, in 2015 alone, LPL paid over $2 million in fines over inappropriate sales of nontraded REITs.
LEGAL MALPRACTICE CLAIMS COSTING MORE, SETTLING SOONER, RESEARCH SHOWS
Insurers and law firms are settling legal malpractice cases earlier as their costs increase, suggests a new study from the American Bar Association (ABA). The study also showed changes in the number of claims by practice area, a rise in successful claims, and more claims against large corporate firms.
Unfortunately, in some large corporate firms, billing the client is the firm’s primary objective. Such a fixation on the billable hour often leads to mistakes that can negatively impact the client—leaving a client shortchanged even when they spend big.
ABA STUDY RESULTS
Every four years the ABA’s Standing Committee on Lawyers’ Professional Liability reports on trends in legal malpractice claims, based on insurance company data. Significant trends found in the most recent report (“Profile of Legal Malpractice Claims 2012-2015”) include:
- There are more malpractice claims related to family law; trust, estate and probate; collection and bankruptcy; and business transactions and commercial law.Claims in all of these areas rose, but the most claims over the 4-year period were against plaintiffs’ personal injury attorneys. Real estate claims—the leading claims category for 2008-2011—rank second in the most recent report, reflecting a more stable market. ABA says the prevalence of estate, trust and probate claims will continue to grow as the baby boomer generation transfers wealth at a record clip.
- Claims are more successful.Claims that ended with no payout to malpractice claimants decreased from almost 60 percent in 2011 to 43 percent in 2015. In addition, insurer payouts were up across the dollar amount spectrum. Payments of $50,000 to $200,000 nearly doubled between 2011 and 2015; payments of $500,000 to $1 million rose almost fivefold; payments of $1 million to $2 million increased from 49 in 2011 to 444 in 2015; and payments over $2 million rose more than threefold.
- There are more claims against large corporate firms. ABA found that large corporate law firms, compared to smaller firms, saw the largest uptick in malpractice claims (1% increase).
HIGH RATES MAY CONTRIBUTE TO DISSATISFACTION
A study member, explaining the rise in malpractice claims against large corporate law firms, told ABA the “client base for large firms has been conditioned over the past decade to be more critical and escalate dissatisfaction into claims.”
That could be because at big law firms, hourly rates are as high as $2,000.
When clients pay top dollar for legal representation and don’t receive top results, it’s understandable why their dissatisfaction could escalate into a malpractice claim.
To succeed, a malpractice claim need not prove that the attorney/the law firm had malicious intent. It merely needs to show that, if not for the attorney’s actions or omissions, the client would have achieved a more favorable outcome in the case.
LPL FINED NEARLY $1M OVER INAPPROPRIATE REIT SALES
The New Jersey Bureau of Securities (Bureau) fined LPL Financial $950,000 and an additional $25,000 to be put into a state investor education fund over supervisory failures tied to sales of illiquid investments.
Free Consultation with a Utah Trust Lawyer
When you need help with a Trust, call Ascent Law for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506