by Brian Mahany
Earlier this week we warned about the risks of purchasing complex and exotic derivative securities. We also warned about illiquid real estate investments and how they can be difficult to sell when you need to raise cash. They may be perfect for some folks but are often a bad idea for seniors. Last Friday an arbitration panel of the Financial Industry Regulatory Authority (FINRA) ordered LPL Financial to pay $1,367,000 to an elderly couple who purchased a real estate investment from one of its former stockbrokers.
The couple filed an arbitration in January of last year against LPL alleging securities fraud, breach of fiduciary duty, fraud and deceit, unfair sales practices, misrepresentation and “elder abuse.” Although the couple originally sought $8 million for their losses, the panel awarded them almost $1.4 million.
In a show of poor taste, LPL asked the arbitrators to seal the testimony of the couple’s chief witness. The panel denied that request. Brokerage firms sometimes try that trick to keep unfavorable and damaging testimony out of the hands of other victims. Clearly LPL did not want others to know what the witness had to say.
In addition to the FINRA arbitration, the couple also sued the company in which they invested their money. That case was originally filed in San Diego Superior Court. Earlier this week a judge ordered that case into a separate arbitration.
The FINRA panel did not explain the reasoning behind its order. Was it elder abuse? Fraud? We will probably never know. What is clear, however, is that the panel sided with the elderly couple.
For its part, LPL denies any wrongdoing.
Real estate investments, particularly the type that this couple purchased, a “tenant-in-common exchange” or TIC, are quite complex and subject to a wide variety of accounting gimmicks to make it appear that the investment is generating a stable return when in actuality, the investors are simply getting their own money back. TIC’s have spawned many complaints against brokerage firms.
The case is over for LPL Financial but other TIC complaints continue. If you purchased a tenant-in-common exchange or some other type of investment and believe you were misled, you may have a claim. Most investment fraud complaints are handled by arbitration. Often these cases can be handled on a contingent fee basis meaning no legal fees unless you win.
The securities fraud and asset recovery lawyers at Mahany & Ertl have helped many people get back their hard earned money. If you believe you were deceived by a stockbroker, brokerage firm, financial planner or investment adviser, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in other locations.