A Houston-based broker-dealer will pay $475,000 in fines to settle charges that it placed investors in unsuitable non-traded real estate investment trusts.
Last month, Next Financial Group settled charges brought by regulators from Massachusetts and New Hampshire after at least one of its representatives recommended unsuitable non-traded REIT placements to investors.
The broker-dealer agreed on Dec. 26 to pay $150,000 in fines to settle charges from the Massachusetts Securities Division that it allegedly failed to supervise one of its representatives over a 10-year period when unsuitable investments in private REITs were recommended to investors.
According to Finra’s BrokerCheck website, the Next Financial clients in question were “overconcentrated” in non-traded REITs in the Massachusetts case. The regulators also censured the firm and issued an injunction to prevent further unsuitable placements in non-traded REITs.
Next Financial also agreed on Dec. 31 to pay $325,000 – including a $235,000 fine – to settle charges brought by the New Hampshire Bureau of Securities that it allegedly failed to supervise the sale to clients of alternative investments, including non-traded REITs.
In its consent order, New Hampshire alleged that Next Financial representatives failed to comply with income thresholds for participating in the REITs and offered the investments to clients over the age of 80, which the state’s Bureau of Securities explicitly discourages.
The firm also agreed to offer remediation to clients as part of both of its settlements.
Finra’s BrokerCheck website reveals that Next Financial has been the target of 27 regulatory actions since the firm was founded in 1998, most recently paying more than $1.4 million in March 2019 to settle charges brought by the SEC that it had failed to disclose that it would receive compensation in the form of 12b-1 fees for recommending certain mutual fund share classes to its clients in lieu of lower-cost shares.