Media Coverage
Source: Law360
Media Coverage
05.24.13
Massachusetts has fined several large brokerage firms, including Ameriprise Financial, Lincoln National and Commonwealth Financial Network, for compliance issues related to the improper sale of real estate investment trust shares. The state’s investigation revealed that the firms failed to follow both internal and state compliance rules and trapped investors in underperforming funds without making liquidity risks clear.
“I think once one state does it, we're probably assured to see other states take the same action,” said Jeffrey Grill, the Washington, D.C.-based co-leader of Pillsbury’s REITs and real estate capital markets practice. While Grill does not think that other states will discover a large amount of compliance issues, he acknowledged that there are some “bad apples” in the brokerage industry that need to be picked out for the market to handle the growing number of offerings and investors.
“Most investment brokers are being much more careful to assure that these products are sold in the appropriate way,” he commented. “We're going to see that the way business was done maybe five years ago has tightened.”
Grill explained that investors typically buy into a non-traded REIT through so-called blind pool offerings and wait up to two years for capital to be raised and new real estate assets to be purchased before the offering closes and liquidity becomes possible.