FINRA fined LPL Financial LLC $950,000 for supervisory failures that regulators say contributed to violations of concentration rules concerning the sales of alternative investments, including non-traded real estate investment trusts ("REITs").
According to the findings, LPL failed to adequately supervise alternative investment sales of REITs, oil and gas partnerships, business development companies, managed futures, hedge funds and additional illiquid investments during the period of January 2008 to July 2012.
Investigators found that during the aforementioned time-frame, LPL failed to supervise in that the firm failed to recognize and/or adequately respond to instances of alternative investment sales that violated concentration limits, which are generally set in the individual investment offering's documents.
FINRA determined that during the review period, LPL incorporated two methods for reviewing sales of alternative investments: one manual and one automated.
FINRA Enforcement alleged that in using the manual method, LPL representatives relied on information that sometimes was outdated and inaccurate to review whether a particular investment complied with suitability requirements.
Similarly, investigators determined that in using the automated method, LPL utilized a database that contained flawed programming and likewise was not updated in a timely manner so as to reflect accurate up-to-date suitability standards and requirements.
FINRA also charged LPL with failure to adequately train its supervisory staff regarding suitability reviews pertaining to alternative investments. The Authority determined that LPL did not train supervisors to specifically analyze state suitability standards and, by doing so, exposed customers to "unacceptable risks."
If you have invested in alternative investments, non-traded REITs, oil and gas partnerships, business development companies, managed futures, hedge funds, or other illquid investments with LPL Financial LLC or with any broker or firm whose investment strategies have exceeded or otherwise violated concentration limits or suitability standards and such supervisory failures have proven harmful to your financial interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.
Press Release: FINRA Fines LPL Financial LLC $950,000 for Supervisory Failures Related to Sales of Alternative Investments (FINRA)