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Former LPL Financial Broker Barred By FINRA For Violating Firm Policy Regarding Alternative Investment Overconcentration

The Financial Industry Regulatory Authority, Inc. (“FINRA”) banned Gary Chackman, a former broker associated with LPL Financial LLC (“LPL”), for violating the firm’s policies and procedures regarding the sale of non-traded Real Estate Investment Trusts (“REITS”) and other alternative investments. According to his FINRA BrokerCheck Report, “[t]o evade the firm’s limitation on the concentration of alternative investments in customers’ accounts, Chackman regularly misidentified his customers’ purported liquid net worth on a required firm form . . . As a result of Chackman’s misrepresentations on those forms, his customers’ concentration in alternative investments, gauged as a percentage of their purported liquid net worth, remained below the firm’s limitations.” Further, Chackman’s unsuitable recommendation of the REITS and other alternative investments over-concentrated the customers’ investment accounts in illiquid investments. Reportedly, one of Chackman’s clients made seven (7) purchases of one REIT, over six (6) months, which after one year constituted 35% of the customer’s assets and 25% of her liquid net worth. Chackman’s FINRA BrokerCheck also states that as a result of the misrepresentations Chackman made on his customers’ alternative investment purchase forms, Chackman evaded the firm’s supervision, which resulted in LPL’s books and records being inaccurate. It is reported that Chackman is the subject of three customer complaint arbitrations, as well as an investigation by the Securities and Exchange Commission.

During 2013, security regulators increased scrutiny over the sale of non-traded REITS because the sale of such alternative investments, which generate higher commissions for registered representatives and brokers, doubled from the prior year. Notably, the Massachusetts Securities Division reached settlement agreements with six broker-dealers, one of which was LPL, for $21.6 million in restitution to clients regarding the sale of non-traded REITS.

Lax & Neville has extensive experience in successfully prosecuting claims on behalf of customers and investors who have suffered losses, including experience in prosecuting claims involving alternative investments and REITS. Additionally, Lax & Neville LLP has nationally represented small broker-dealers, investment advisers, financial services professionals and securities industry companies in regulatory matters and securities-related and commercial litigation. Please contact our team of attorneys for a consultation at (212) 696-1999.