(The following is a reformatted version of a press release
issued by the Office of William Francis Galvin, Secretary of the
Commonwealth and received via electronic mail. The release was
confirmed by the sender.)
July 10, 2013
SECRETARY GALVIN BEGINS INVESTIGATORY SWEEP OF THE SALES
OF HIGH RISK ALTERNATIVE INVESTMENTS TO SENIORS
Secretary of the Commonwealth William F. Galvin today began an
investigation into broker dealers’ sales practices in connection
with the sales of “Alternative Investments” to seniors.
Alternative Investments - as they are commonly known - are non-traditional securities including such products as REITs, oil and
gas partnerships, 506 private placements, structured products,
tenancy-in-common and other securities carried on the broker
dealers’ non-traditional product platforms. The products are
attractive to seniors as they provide a return considerably
higher than that of traditional investment options.
With this higher return, however, come higher risks. The
complexity of the products also makes them difficult for the
average investor to understand.
Secretary Galvin recently settled with five independent broker
dealers for improper sales of REITs to seniors returning over
$11 million to Massachusetts investors. (REITs are a type of
“My office’s recent REIT investigation has only heightened my
concern that the senior market place is being targeted for the
sales of these high-risk, esoteric products,” Galvin said.
“While these products are not unsuitable in and of themselves,
they are accidents waiting to happen when they are sold to
inexperienced investors by untrained agents who push the
products to score the large commissions associated with
The investigation targets various types of broker dealers -
investment banks, discount brokers, and independent brokers.
“Being included on the list is not an indication of wrongdoing
at this time,” the Secretary said.
The Massachusetts Securities Division’s subpoenas asked for
information concerning the firms’ sales of the alternative
investment products to seniors in the Commonwealth as well as
other materials to determine the firms’ supervision,
compliance and training associated with the sales of these
products to retail investors in the Commonwealth.
Subpoenas have gone out to Morgan Stanley & Co. LLC, Merrill
Lynch, Pierce Fenner & Smith Incorporated Securities LLC, UBS
Securities LLC, Fidelity Brokerage Services LLC, Charles Schwab
& Co., Inc., Well Fargo Advisors, TD Ameritrade, INC,
ING Financial Partners, Inc., LPL Financial LLC, Commonwealth
Financial Network, MML Investor Services, LLC, Investors Capital
Corp, Signator Investors, Inc., Meyers Associates, L.P., and WFG
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