LPL Financial to Pay $3.2 Million for Improper Sale of Complex Products

September 24, 2015

Independent broker-dealer LPL Financial announced an agreement this week to pay $3.2 million in response to penalties for the improper sales of non-traded real estate trusts and leveraged electrically traded funds (ETFs.) The charge, which were levied by the North American Securities Administrators Association (NASAA) and the Attorneys General from the Commonwealth of Massachusetts and the state of Delaware, includes a failure to implement an adequate supervisory system for its registered representatives in regards to the sale of these risky positions and illiquid trusts. The San Diego-based branch of the firm was ordered to pay $1.425 million dollars that will be distributed among the 48 states, Puerto Rico and the District of Columbia. The Boston arm of LPL was additionally ordered to pay $1.8 million after allegedly 200 Massachusetts residents into uncertain positions like ETFs. Of that $1.8 million, the state of Delaware will receive $200,000 in restitution. Massachusetts Attorney General Maura Healy launched an investigation into allegations of LPL’s strong-arm and misleading sales tactics, which found that many of the state’s customers lost a substantial amount of money in leveraged ETFs for long periods of time. The investigation additionally found that the firm “failed to supervise its financial advisors who caused clients to hold these investments for extended period of time, and did not consistently adhere to its policy of imposing fines on financial advisors who exceeded concentration limits.” This is not the first time that LPL has faced penalties for misleading and dishonest sales tactics. Earlier in 2015, the Financial Industry Regulatory Authority (FINRA) charged the firm with $11.7 million in total for a similar violation, which included $6.3 in restitution for customers who were charged more for their retirement and charitable organization accounts.