LPL Financial Settles Supervisory Failure Charges with FINRA for $11.7 Million

LPL Financial agreed to pay more than $11 million to settle charges in connection with a Financial Industry Regulatory Authority (FINRA) investigation into the firm, as recently reported in the Wall Street Journal.  According to the Letter of Acceptance Waiver and Consent filed with FINRA, LPL Financial was alleged to have supervisory failures, related to non-traditional products such as exchange traded funds (ETFs), variable annuities, and non-traded real estate investment trusts (REITs).

LPL allegedly failed to deliver over 14 million trade confirmations in addition to failing to properly monitor and report trades.  Of the amount collected, $1.7 million is reportedly restitution for customers, while LPL Financial was fined an additional $10 million.

Vigilant supervision over the sale of non-traditional investments is especially important because public customers are typically unfamiliar with the products being sold to them.  In addition, many non-traditional products have higher commissions (meaning a bigger incentive for a broker to sell such products) than their more traditional counterparts.

Non-traditional products may also have a higher degree of risk for the investor than a more traditional product.  In addition to a higher risk of loss of principal, the risks of non-traditional products can also include liquidity risk – such as high surrender charges in the case of an annuity, or the complete inability to sell on a primary market as with non-traded REITs.

LPL is no stranger to regulatory investigations and fines.  In fact, LPL was just the subject of a 2013 Illinois Securities Department investigation, which resulted in LPL being ordered to pay nearly $3 million over violations in connection with the sale of “variable annuities–one of the firm’s top-selling products,” according to a Wall Street Journal article.  Of that amount $2 million was reportedly a fine, with another $820,000 paid as restitution to clients.

Investor losses in non-traditional investments are unfortunately far too common.  Frequently the victims are senior-aged who have lost their retirement savings after being sold a non-traditional investment such as a REIT or variable annuity with promises of “income for life.”

It is the right of any and all investors who believe they may have suffered losses as a result of recommendations of their financial advisor to contact our offices to explore their legal rights and options.  The attorneys at Malecki Law have extensive experience representing investors in cases stemming from the improper recommendation of non-traditional investments to customers and other broker misconduct.  If you or a family member invested in non-traditional investments such as exchange traded funds, variable annuities or REITs, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.


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