Galvin Sanctions Next Financial Broker Charles C. Kulch Over Allegedly Unsuitable Investment Recommendations
According to an administrative complaint and various reports, the Secretary of the Commonwealth of Massachusetts William Galvin, has charged Charles C. Kulch, a former Next Financial Group broker, with unsuitable sales of illiquid, high-commission products, including non-traded REITs and variable annuities.
Kulch reportedly generated close to $1 million in commissions from the sale of non-traded REITs and variable annuities in a five-year period, according to the complaint.
Massachusetts Securities Division has been keeping a close eye on broker-dealers’ sales of non-traded REITs for the past few years and has been fining firms for failing to supervise how brokers sell the typically illiquid, high-commissioned product.
As we reported in January 2020, the Massachusetts Securities Division reportedly reached a settlement and fined Next Financial $150,000 last December for alleged sales practice violations and a failure to supervise, including the purported unsuitable sales of non-traded REITs by Kulch.
Kulch allegedly sold non-traded REITs to more than 100 Massachusetts investors, including nearly 50 transactions that purportedly violated Next Financial’s own policies regarding overconcentration and prohibiting the sale of non-traded REIT’s to customers over the age of 80.
According to Massachusetts, many of the sales allegedly exceeded limits as determined by a client’s overall liquid net worth.
At the same time, the New Hampshire Bureau of Securities Regulation reportedly settled with Next Financial hitting Next Financial with a fine of $235,000 and costs of $90,000 for purportedly failing to reasonably supervise the sale of certain alternative investments to a number of clients, including unsuitable sales of non-traded REITs.
According to his FINRA BrokerCheck report, Kulch was affiliated with Next Financial in Nashua, NH from 2006 until June 2020. He has six customer complaints reportedly filed against him during his career in the securities industry. His broker profile indicates 4 other regulatory events prior to the above allegations.
Filing a Complaint against your Brokerage Firm
Non-traded real estate investment trusts (REITs) are complex and inherently risky products. Compared to traditional investments, such as stocks, bonds and mutual funds, REITs are significantly more complex and often better suited for sophisticated and institutional investors.
Another problem often associated with alternative investment recommendations is the high sales commissions brokers typically earn – as high as 15%.
Brokers have an obligation to make investment recommendations that are consistent with their clients risk tolerance, net worth, investment objectives and experience in the market. Unfortunately, in many cases, the high sales commission may provide some brokers with enough incentive to make unsuitable investment recommendations.
In addition to the high risks, non-traded REITs, often lack liquidity. Investors looking to sell these investments often have difficulty finding a buyer, and if they are able to find one can suffer significant losses on the sale.
Broker dealers are required to perform adequate due diligence on any investment they recommend and to ensure that all recommendations are suitable for the investor. Firms that fail to do so, may be held responsible for any losses in a FINRA arbitration claim.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Franklin, Tennessee.
If you are concerned about your investments with Charles C. Kulch and Next Financial, you may be able to file a complaint against the brokerage firm. Please call the securities fraud attorneys at The White Law Group at 888-637-5510 for a free consultation.
For more information on The White Law Group, and its representation of investors, please visit www.WhiteSecuritiesLaw.com. The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Franklin, Tennessee.
Tags: Charles C. Kulch annuities, Charles C. Kulch complaints, Charles C. Kulch FINRA, Charles C. Kulch investigation, Charles C. Kulch lawsuit, Charles C. Kulch losses, Charles C. Kulch Mass. securities, Charles C. Kulch non-traded REITs, Next Financial AWC, Next Financial fined, Next Financial FINRA, Next Financial sanctioned, Securities Attorney, securities law Last modified: December 6, 2022