Maryland Broker Barred by FINRA Over Sale of Non-Traded REITs

Gary Chackman, a former LPL Financial broker, was barred last week by the Financial Industry Regulatory Authority Inc.(FINRA) for several violations of securities industry rules, including falsifying documents, related to the sale of nontraded real estate investment trusts(nontraded REITS) from 2009 to 2012.

In a December 19th InvestmentNews article, Bruce Kelly writes that nontraded REITs are high-commission products, paying reps a sales commission of 7%. Regulatory action has focused on broker-dealers and their sales policies and procedures concerning the product. The Massachusetts Securities Division reached settlement agreements this year with six broker-dealers for $21.6 million in restitution to clients over sales of nontraded REITs. The firms, including LPL, have paid fines of close to $1.5 million. These were related to the firms that had clients of brokers affiliated with the firms who had more than 10% of their liquid net worth invested in nontraded REITs, a violation of Massachusetts rules. Actions such as against Chackman, have been rare.

Gary Chackman “recommended and effected unsuitable transactions in the accounts of at least eight LPL customers, by over-concentrating his customers' assets in [fusion_builder_container hundred_percent="yes" overflow="visible"][fusion_builder_row][fusion_builder_column type="1_1" background_position="left top" background_color="" border_size="" border_color="" border_style="solid" spacing="yes" background_image="" background_repeat="no-repeat" padding="" margin_top="0px" margin_bottom="0px" class="" id="" animation_type="" animation_speed="0.3" animation_direction="left" hide_on_mobile="no" center_content="no" min_height="none"][REITs] and other illiquid securities,” according to the Finra letter of acceptance, waiver and consent, dated Dec. 12.

“Additionally, Chackman falsified LPL documents to evade the firm's supervision and caused the firm's books and records to be inaccurate by submitting dozens of 'alternative investment purchase' forms that misrepresented his customers' purported liquid net worth," according to the letter.

In one example, a client of Chackman made seven purchases of one REIT, each for $75,000 within six months, and after a year, 35% of the client's assets and 25% of her liquid net worth were invested in REITs and other alternative investments.

According to FINRA's BrokerCheck, Gary Chackman was previously registered with the following FINRA firm(s):

SUMMIT BROKERAGE SERVICES, INC. (CRD# 34643) - BALTIMORE, MD
03/2012 - 04/2013

LPL FINANCIAL LLC (CRD# 6413) - BALTIMORE, MD
12/2001 - 03/2012

AXA ADVISORS, LLC (CRD# 6627) - NEW YORK, NY
05/1990 - 12/2001

THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (CRD# 4039) - NEW YORK, NY
05/1990 - 01/200

If you have sustained investment losses due to your stock broker or financial advisor’s recommendations regarding non-traded REITs, or other illiquid, complex products, call for a free consultation on how to potentially recover your losses. To speak with an attorney call Soreide Law Group at 888-760-6552.

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