FINRA Bars LPL Financial Broker for Falsifying Documents

On December 13, 2013, Financial Industry Regulatory Authority Inc. (FINRA) barred Gary Chackman after he allegedly falsified company documents to evade procedures and protocol, which caused an overconcentration of customer’s investments in alternative assets. Chackman evaded the firm’s supervision and inaccurately completed investor documents. LPL Financial Inc., Chackman’s employer at the time of the incident, denies any involvement in Chackman’s illegal activity.

Although Chackman neither admitted nor denied FINRA’s findings, he consented to the described sanction; therefore FINRA barred him as a member of the association. Although there are numerous complaints and investigations pending before FINRA, the association rarely bars brokers. Only one other broker was barred this year due to misrepresentations in the sale of an investment product.

Not only did Chackman allegedly misrepresent the financial transaction to the firm, but also failed to disclose the high-risk nature of alternative investment to his clients.  The investor’s liquid net worth was misidentified on purchase forms when acquiring Real Estate Investment Trusts (REITs) and alternative investments. By misrepresenting client information on the purchase forms, the client’s purported liquid net worth remained below the firm’s limitation. Therefore, the REITs became highly concentrated in illiquid alterative investments.

REITs are a type of security purchased on the major stock exchanges and directly invested through properties or mortgages. The alternative investment may consist of shopping malls, office buildings, apartments, warehouses and hotels. Although REITs returns are historically low with a return around 2% or 3% after inflation, broker-dealer receives a 7% commission. The high-commission structured alternative investments have attracted regulatory action focusing on broker-dealers and the firm’s policies and procedures concerning the products.

According to FINRA, the overconcentration of client accounts occurred during a four-year period from 2009 until 2013. Three client complaints were settled while Chackman was at LPL Financial Inc. In the first complaint, the client alleged unsuitable purchases of alternative investment. The settlement amount was $85,000.00. The second complaint alleged similar circumstances as the first complaint and settled for an amount of $199,800.00. Finally, the third complaint consisted of similar allegations as the previous complaints and settled for $461,947.50.

By 2012, Chackman was discharged from LPL Financial Inc. due to violations of LPL Financial policies and procedures relevant to the sale of alternative investments. Upon termination from LPL Financial Inc., Chackman was employed with Summit Financial Group Inc. for one year prior to being discharged. In 2013, Summit Financial Group Inc. discharged Chackman for operating out of an unregistered location.

Currently an investigation involving Chackman is pending before the Securities and Exchange Commission (SEC).  Chackman’s most recent employer, Heritage Capital Inc., is not required to disclose any details regarding the pending investigation except that is relates to non-traded REITs that were sold before Chackman’s affiliation with Heritage Capital Inc.

The attorneys at Gana LLP are experienced in investigating claims of excessive trading and churning. By applying a detailed and forensic approach, the attorneys at Gana LLP can understand your investment activity in order to explain those losses and apply the appropriate law to advance your claims. Our consultations are free of charge and the firm is only compensated if you recover.

By: Shazia Ahmad