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Investor Alert-Donald Woods and LPL Financial

Investor Alert-Donald Woods and LPL Financial

Investor Alert-Donald Woods and LPL Financial

DONALD WOODS (CRD: #727894)

Early this month, Donald Woods, a former representative affiliated LPL Financial (“LPL”) in Kentucky, was fined $10,000 and suspended by FINRA for 6 months for inflating the net worth of customers on firm documents.  Woods became registered as a general securities representative through LPL in July 2010 and remained associated with LPL until it terminated his registration in January 2017.

Woods is not currently registered as a broker or an RIA, according to his profile on FINRA’s BrokerCheck website. There are 12 disclosures cited over the course of his 31-year career, the most recent being a pending customer dispute dated Oct. 1, 2019, in which the claimants requested $140,000 damages, alleging they “desired to purchase low-risk investments, but were encouraged to invest in risky business development companies and REITs through ongoing misrepresentations, which caused them monetary losses.”  Most of the other disclosures include claims of unsuitable investments made by Woods on behalf of his clients.

FINRA FINDINGS

On or about June 11, 2014, Woods submitted an application on behalf of an elderly customer to invest $54,000 in a Real Estate Investment Trust (“REIT”), according to the FINRA Acceptance, Waiver and Consent Letter (the “Letter”). Based on the customer’s income, LPL’s internal guidelines restricted holdings in alternative investments, such as REITs, to 10% of her liquid net worth. The Letter explains, “To evade this restriction, Woods submitted an application that stated that Customer A’s liquid net worth was $746,000 when, as Woods knew, her liquid net worth was approximately $400,000.”

Less than a year later, Woods submitted applications on behalf of a retired husband and wife to buy shares in four REITs totaling $200,000, according to FINRA. Those forms stated that the couple had a combined liquid net worth of about $700,000, the Letter noted.  Pursuant to LPL’s guidelines the couple’s holdings in alternative investments, such as REITs, was limited to 25% of their liquid net worth. The Letter stated, “To circumvent this restriction, Woods submitted revised applications on or around June 4, 2015 that stated that Customer B and C’s liquid net worth was $900,000 when, as Woods knew,” it was approximately $700,000.

According to the Letter, FINRA found that Woods violated FINRA Rules 2010 (governing standards of commercial honor and principles of trade), 2111 (governing the suitability of securities transactions and investment strategies) and 4511 (governing general requirements for books and records).  For more information on suitability: Click Here.  For more information on fiduciary breaches: Click Here.

RISKS OF REITS

REITs are companies that own, operate, or finance income-generating real estate. REITs pool together the capital of numerous investors, making it possible for individual investors to earn dividends from real estate investments—without having to buy, manage, or finance any properties themselves.  Some REITs are publicly traded, others are public non-traded, and still others are private, meaning that they are not registered with the Securities and Exchange Commission. REITs can be a risky investment and can be associated with low growth, potentially high management and transaction fees, as well as illiquidity.  As such, many brokerage firms impose restrictions on over-investing in REITs to protect investors.

CONTACT

If you have suffered investment losses as a result of the malpractice or misconduct of Donald Woods or LPL, our experienced team of securities attorneys may be able to assist you in recovering some or all of your losses. Call us toll-free at 888-607-4819 or email us through our “Contact” page to schedule a free consultation.