LPL Financial Settles Disputes at Tune of $3.2 Million, More Fines May Be Coming

LPL Financial LLC has agreed to pay two more settlements, and these are big ones.  On September 23, 2015, it was announced that LPL Financial entered into two settlements for disputes arising from the firm’s supervisory system over recommendations of alternative products, including non-traded real estate investment trusts (REITs).  This time, LPL has agreed to pay $1.425 million to 48 States, the District of Columbia, Puerto Rico and the U.S. Virgin Islands, according to a news release put out by the North American Securities Administrators Association (NASAA).  Separately, it was reported that LPL agreed to pay Massachusetts and Delaware Attorneys General $1.8 million for placing 200 clients into leveraged exchange traded funds (ETFs).  To top it off, it appears New Hampshire regulators continue to seek approximately $3.6 million from LPL arising from the sale of non-traded REITs, according to the Think Advisor article.

LPL Financial is no stranger to substantial fines for supervisory failures tied to alternative products.  In May 2015, the Wall Street Journal reported that the Financial Industry Regulatory Authority (FINRA) fined LPL Financial $11.7 million over failing to properly supervise complicated products such as nontraditional ETFs.  Malecki Law also noted in March 2014 that LPL was fined $950,000 by the over its supervisory failures stemming from recommendations of non-traded REITs and other illiquid investments.  At that time, we posited the question whether the fines being assessed are large enough to deter future bad conduct?  Time will tell.  Malecki Law continues to represent and recover money for investors that suffered losses as a result of unscrupulous recommendations in non-traded REITs and other alternative products such as leveraged ETFs.

Non-traded REITs are particularly problematic and unsuitable products for many investors.  Brokers like to recommend them because the products typically pay a high commission, but non-traded REITs are illiquid and may cause a substantial loss to the investor’s principal payment when buyers on secondary markets will only accept the products at a drastic discount to the actual price initially paid.

Leveraged ETFs are also very risky products and generally unsuitable for most investors.  They are generally marketed in offering documents as complex and risky products that are generally only appropriate for sophisticated day-trading investors.  The leverage used in the product means that losses could be amplified 2 or 3 times larger than the indexes the ETFs are designed to track.  Holding the product for more than a day can compound losses in a phenomenon known as “decay.”

Due to the very risky nature of alternative investments such as non-traded REITs and leveraged ETFs.  The Securities Attorneys at Malecki Law have successfully represented many investors who lost money in their accounts as a result of unsuitable recommendations from brokers at firms such as LPL Financial to purchase these and other risky investments.

If you believe you or a family member have suffered losses in a securities account, as a result of questionable securities recommended, or unscrupulous actions taken in the securities account, please contact the attorneys at Malecki Law for a free confidential consultation.