Business

Secretary of State William Galvin charges LPL Financial with improper sales of non-traded REITs

Massachusetts Secretary of the Commonwealth William F. Galvin charged LPL Financial of Boston on Wednesday with failure to supervise agents who sold investments in non-traded real estate investment trusts, and with “dishonest and unethical” business practices.

A probe by the Securities Division, which Galvin oversees, found 597 transactions by Massachusetts residents in seven REITs with more than $28 million invested.

LPL, a network of brokers, received at least $1.8 million in commissions on those sales from 2006 through 2009, the state alleged.

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According to the division’s complaint, most of the 597 transactions violated state laws or LPL’s own compliance practices. The division is seeking a cease-and-desist order against LPL, a censure, and full restitution to those investors who were sold the instruments in violation of Massachusetts regulations and the requirements of the REIT prospectus.

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“Non-traded REITs present risks to investors,” Galvin said in a statement. “Massachusetts recognizes those risks and requires limits on an investors’ exposure to the high fees, potential illiquidity, and risky nature of non-traded REIT products.”

REITs own and manage income-producing property or are involved in real estate financing. Non-traded REITs are more difficult to get one’s money out of, and tend to carry high fees and commissions, Galvin said.

An LPL spokesman was not immediately available for comment.

Beth Healy can be reached at bhealy@globe.com.