LPL Ordered to Pay 1.4M to Elderly Couple for Investment Losses of REITs

FINRA arbitrators have ordered LPL Financial LLC to pay an elderly couple $1.4 million to compensate the couple for investment losses suffered in real estate deals. The couple, Heinrich and Araceli Hardt, bought two tenant-in-common ("TIC") investments, one in 2007 and another in 2008, from former LPL broker David Glenn. The investments were sponsored by Direct Invest LLC.

The broker's sales pitch included representations that the investors would receive monthly income checks from the investments. Dubbed a TIC, the investment is a form of real estate ownership in which two or more parties have a fractional ownership interest in the property. TICs gained in popularity after a 2002 Internal Revenue Service ruling that allowed investors to defer capital gains on real estate transactions involving the exchange of properties. After the real estate bubble burst, many TIC investors saw their properties falter.

One of the biggest TIC sponsors, DBSI Inc., declared bankruptcy in 2008, and broker-dealers that sold those deals have faced dozens of arbitration complaints filed with Financial Industry Regulatory Authority Inc. This case against LPL did not involve DBSI but another sponsor, Direct Invest.

LPL is believed to have sold numerous TIC investments, as well as millions of dollars of real estate investment trusts (REITs) that also have sustained substantial losses. The REITs may have included Behringer Harvard and Inland Western. Many of investors in these products could not afford to risk losing the money that they invested. Investors can pursue claims in an attempt to recover these investment losses through FINRA arbitration proceedings.

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