Galvin subpoenas banks for details

Massachusetts Secretary of State William Galvin sent subpoenas Wednesday to 15 banks and investment brokerage firms to investigate business practices related to sales of higher-risk alternative investments to older customers.

Among others, Galvin sent subpoenas to Bank of America’s Merrill Lynch, Boston-based Fidelity Brokerage Services, Charles Schwab & Co., Morgan Stanley & Co., Wells Fargo Advisors, UBS Securities, TD Ameritrade, and LPL Financial of Boston.

This latest round of subpoenas is an outgrowth of an investigation and settlement that Galvin’s office recently completed into the sale of real estate investment trusts, or REITs, to seniors. Five independent broker dealers paid $11 million in fines in that case.


In the new subpoenas, Galvin has requested detailed information about how many alternative investments companies have sold to adults over age 65, their manuals and marketing materials, and any complaints about the products. The companies have until July 24 to comply.

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Just because a company received a subpoena does not mean it is suspected of wrongdoing, Galvin said.

“Instead of waiting for something bad to happen,” Galvin said, the better approach is to ask the companies what they are doing with alternative investments. “This is the best way to proceed,” he said.

These alternative investments, from real estate investment trusts to oil-and-gas partnerships, are often complex and rarely transparent, making it difficult for consumers, and occasionally even brokers, to evaluate the risks, Galvin said.

But the promise of high yields may appeal to senior citizens who may have built up a nest egg but are getting paltry returns on bank accounts due to low interest rates, or who are skittish about returning to the stock market, Galvin said.


Bank of America declined to comment about the subpoena Wednesday.

Wells Fargo Advisors spokesman Tony Mattera said, “Our policy is always to cooperate fully with regulators.”

Galvin also sent subpoenas to ING Financial Partners, Commonwealth Financial Network, MML Investor Services, Investors Capital Corp., Signator Investors Inc., Meyers Associates, and WFG Investments.

Deirdre Fernandes can be reached at Follow her on Twitter @fernandesglobe.