In May 2016, LPL broker Brian David Smit of Sioux Falls, South Dakota was barred from the securities industry. This was pursuant to an agreement reached between Smit and FINRA regulators, an agreement referred to as an “AWC.” The allegations concerned the sale of unapproved private securities. His record also reflects that Smit was under investigation for such sale when he left LPL. The sale of unapproved investments is a matter of concern since it is commonly a vehicle for fraud.
On May 6, 2015, the Financial Industry Regulatory Authority Inc. (“FINRA”), ordered LPL Financial to pay $11.7 million in fines and restitution for what it deemed “widespread supervisory failures” related to sales of complex investment products. Such products are suitable for only a limited portion of the investing public and FINRA prohibits the sale of such products to investors to whom such investments would not be suitable.
From 2007 to as recently as April 2015, LPL failed to properly supervise sales of certain complex investments, including certain exchange-traded funds (“ETFs”), variable annuities and nontraded real estate investment trusts (“REITs”), and also failed to properly deliver more than 14 million trade confirmations to customers, according to the regulator.
LPL did not have a system in place to monitor the length of time customers held securities in their accounts or to enforce limits on concentrations of those complex products in customer accounts, FINRA said. Such issues can lead to the sale of unsuitable investments and put such portfolios in a position of greater risk than the investor may have wanted or could afford to take.
The systems that LPL had in place to review trading activity in customer accounts were plagued by “multiple deficiencies,” Finra said. The firm failed to generate proper anti-money laundering alerts, for instance, and did not deliver trade confirmations in 67,000 customer accounts, according to the settlement letter.
The regulator also charged the firm for failing to supervise advertising and other communications, including brokers’ use of consolidated reports.
The penalty includes a $10 million fine and restitution of $1.7 million to customers who were sold certain exchange traded funds (“ETFs”). FINRA said the firm may pay additional compensation to ETF purchasers “pending a review of its ETF systems and procedures.” As such, investors should speak to an attorney to maximize recovery of losses.
Content from this post from Investmentnews.com.