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.
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Helpful Salt Lake Legal Posts
Salt Lake City
Salt Lake City, Utah
|City of Salt Lake City|
“The Crossroads of the West”
|Named for||Great Salt Lake|
|• Type||Strong Mayor–council|
|• Mayor||Erin Mendenhall (D)|
|• City||110.81 sq mi (286.99 km2)|
|• Land||110.34 sq mi (285.77 km2)|
|• Water||0.47 sq mi (1.22 km2)|
||4,327 ft (1,288 m)|
|• Rank||122nd in the United States
1st in Utah
|• Density||1,797.52/sq mi (701.84/km2)|
| • Urban
||1,021,243 (US: 42nd)|
| • Metro
||1,257,936 (US: 47th)|
| • CSA
||2,606,548 (US: 22nd)|
|Time zone||UTC−7 (Mountain)|
|• Summer (DST)||UTC−6|
|Area codes||801, 385|
|GNIS feature ID||1454997|
|Major airport||Salt Lake City International Airport|
|Website||Salt Lake City Government|
Salt Lake City (often shortened to Salt Lake and abbreviated as SLC) is the capital and most populous city of Utah, as well as the seat of Salt Lake County, the most populous county in Utah. With a population of 199,723 in 2020, the city is the core of the Salt Lake City metropolitan area, which had a population of 1,257,936 at the 2020 census. Salt Lake City is further situated within a larger metropolis known as the Salt Lake City–Ogden–Provo Combined Statistical Area, a corridor of contiguous urban and suburban development stretched along a 120-mile (190 km) segment of the Wasatch Front, comprising a population of 2,606,548 (as of 2018 estimates), making it the 22nd largest in the nation. It is also the central core of the larger of only two major urban areas located within the Great Basin (the other being Reno, Nevada).
Salt Lake City was founded July 24, 1847, by early pioneer settlers, led by Brigham Young, who were seeking to escape persecution they had experienced while living farther east. The Mormon pioneers, as they would come to be known, entered a semi-arid valley and immediately began planning and building an extensive irrigation network which could feed the population and foster future growth. Salt Lake City’s street grid system is based on a standard compass grid plan, with the southeast corner of Temple Square (the area containing the Salt Lake Temple in downtown Salt Lake City) serving as the origin of the Salt Lake meridian. Owing to its proximity to the Great Salt Lake, the city was originally named Great Salt Lake City. In 1868, the word “Great” was dropped from the city’s name.
Immigration of international members of The Church of Jesus Christ of Latter-day Saints, mining booms, and the construction of the first transcontinental railroad initially brought economic growth, and the city was nicknamed “The Crossroads of the West”. It was traversed by the Lincoln Highway, the first transcontinental highway, in 1913. Two major cross-country freeways, I-15 and I-80, now intersect in the city. The city also has a belt route, I-215.
Salt Lake City has developed a strong tourist industry based primarily on skiing and outdoor recreation. It hosted the 2002 Winter Olympics. It is known for its politically progressive and diverse culture, which stands at contrast with the rest of the state’s conservative leanings. It is home to a significant LGBT community and hosts the annual Utah Pride Festival. It is the industrial banking center of the United States. Salt Lake City and the surrounding area are also the location of several institutions of higher education including the state’s flagship research school, the University of Utah. Sustained drought in Utah has more recently strained Salt Lake City’s water security and caused the Great Salt Lake level drop to record low levels, and impacting the state’s economy, of which the Wasatch Front area anchored by Salt Lake City constitutes 80%.