A unit of LPL Investment Holdings Inc, the top U.S. independent brokerage, was ordered by a FINRA arbitration panel to pay about $1.4 million to 2 investors who claimed the company had engaged in civil fraud and elder abuse related to real estate investments. In their Statement of Claim, filed in early 2011, investors Heinrich and Araceli Hardt accused LPL of misleading them about real estate investments marketed as private placements.  The investments, fractional interests in commercial real estate, were purchased through Boston-based Direct Invest, LLC, a real estate investment and asset management company. Brian Miller, the Hardt's attorney, said that investing in fractional real estate interests appeals to many investors looking for a way defer capital gains taxes on real estate properties they recently sold.  U.S. tax regulations allow real estate owners to defer those taxes when they reinvest the money in certain types of real estate within a specific period. Hardts v. Direct Invest. According to Claimants' attorney, In this particular case, the Hardts had recently sold some apartment buildings and thought the income they would receive on the investments would replace the rental income from their apartments.  However, monthly checks from the real estate investments were not tied to rental income.  Instead, they reflected a combination of money the investment company borrowed and a partial return of the Hardts' own funds.  None of the companies involved adequately disclosed that information to the Hardts.  Miller added that the Hardts paid exorbitant fees, ranging between 22% - 25% of the $3.4mn they invested. The Hardts originally sought $8 million and had named 2 other independent brokerages as Respondents.  However, the arbitration panel dismissed the claims against those firms in December after the couple settled with them.  One of the companies has since shut down, according to regulatory filings. While the FINRA panel found LPL liable in the case, it awarded the investors $1.37 million, according to the ruling. The panel did not provide any reasons for its award, as is typical of arbitration rulings. Elder abuse claims are allowed ... under California law in cases involving alleged securities fraud, according to Miller.  However, in issuing its decision, the panel provided no reasons for its award. An LPL spokesperson said: "(T)he arbitration panel did not indicate there was any evidence of elder abuse in this matter.  Moreover, given the amount of the award in comparison to the alleged damages, we believe that the arbitrators rejected many if not most of claimants' claims."  He added, that the broker involved in case left LPL before the Hardts filed their claim.  [Reuters, 2/13/12]