According to FINRA, Western International Securities, Inc. was censured and fined $400,000 for failing to establish adequate supervisory systems for non-traded REIT sales. The firm was also ordered to pay $471,401.57 in restitution and partial restitution to customers.

The firm's written supervisory procedures required suitability reviews for non-traded REIT investments but failed to specify what documents to review or steps to take in conducting proper suitability analysis. Some supervisors reviewed only non-traded REIT disclosure forms that lacked critical customer profile information including age, investment objectives, experience, time horizon, liquidity needs, risk tolerance, and financial situation. The procedures did not require supervisors to review new account forms before approving transactions, and some supervisors failed to do so.

A former representative recommended over $7.8 million in non-traded REIT purchases to customers without reasonable basis to believe the recommendations were suitable. He sold these illiquid, high-risk investments within three months of joining the firm to customers of various ages and profiles, including retirees, those with limited financial resources, and customers with little to no investment experience. The firm's supervisory system failed to detect or properly investigate red flags associated with these sales.

Additionally, the firm failed to report or timely report written customer complaints, arbitrations, and settlements, which impeded FINRA investigations and prevented public disclosure.

Non-traded REITs are illiquid investments that may not be suitable for investors needing access to their money or those with limited financial resources. This case highlights the critical need for thorough suitability analysis before recommending such investments.