LPL Financial Fined $6.5 Million for Supervisory Deficiencies in Wake of $1+ Million Ponzi Scheme

Attorney Advertising Disclaimer

FINRA fined LPL Financial $6.5 million for failures in its supervisory system related to record retention and finger-printing that purportedly enabled a former LPL broker to create false documents and steal over $1 million of LPL customers' money in the furtherance of a Ponzi scheme. In November 2019, the SEC barred former LPL Financial broker James Thomas Booth for operating a Ponzi scheme that defrauded 40 investors.

In its AWC letter #2018059192701, FINRA wrote that LPL failed to establish and maintain adequate supervisory systems and procedures pertaining to consolidated reports and that the firm failed to comply with recordkeeping obligations, finding that LPL failed to preserve 1.5 million customer communications—including mutual fund switch letters and wire transfer confirmations.

FINRA also found that for the 87 million required records LPL did keep electronically, the firm failed to store them in a non-rewritable, non-erasable format as required by securities laws. Furthermore, LPL allegedly failed to fingerprint non-registered associated persons and specifically permitted a non-registered associated person to join its firm even though that person had either been barred by a regulator or had been convicted of a felony within the prior ten years, either of which would have ordinarily disqualified the person from associating with the firm.

Investigators identified a specific situation in which LPL submitted fingerprints of a prospective associate to FINRA, which in turn notified the firm that the individual had a criminal conviction related to forgery and was therefore disqualified. Nonetheless, LPL purportedly allowed that person to remain with the firm for an additional two years.

In other words, LPL allegedly kept its e-mails/other communications with customers in a place where they could be edited or even deleted by unscrupulous brokers and allowed persons with significant disciplinary—and potentially criminal—pasts to associate with the firm.

According to the SEC's 2019 bar, ex-LPL Financial and Investment Financial stockbroker James Booth (CRD #1906145) misappropriated $4.9 million from 40 investors from 2013 through 2019 through false and misleading statements to investors, amongst other misconduct.

For instance, Booth purportedly instructed an elderly widow to move money from her late husband's pension into a bank account called "Insurance Trends," which Booth allegedly controlled. Booth stands accused of fraud in federal court with alleged damages in the tens of millions of dollars.

LPL Financial terminated Both for misappropriating customer funds in 2019, while FINRA barred him shortly thereafter for converting at least $1 million in customer funds.

If you have invested with former LPL Financial broker James Thomas Booth or with any other financial adviser or representative whose false and misleading claims, misrepresentations, unsuitable recommendations, or involvement in a fraudulent scheme such as a Ponzi has proven harmful to your investments or interests through misappropriation, conversion, or otherwise, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.