LPL Financial to Pay $6 Million for Supervisory, Sales Practice, and Review Failures

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LPL Financial's supervisory failures resulted in potentially unsuitable trades and caused customers to incur excessive sales charges, according to FINRA, which fined LPL $5.5 million and ordered over $650,000 in restitution to customers harmed by LPL's various securities violations, including a failure to accurately disclose fees being charged to customers.

This is newest in a long list of regulatory sanctions levied against LPL Financial.  FINRA previously fined LPL Financial $6.5 million for supervisory deficiencies that allowed a broker to operate a $1+ million Ponzi scheme that defrauded 40 investors.  In 2020, FINRA found that LPL Financial unsuitably sold elderly clients non-traded real estate investment trust (REIT) products after an LPL broker lied about customers' net worth. The SEC barred LPL Financial broker James Thomas Booth for operating this Ponzi scheme in 2019, finding that Booth misappropriated $4.9 million from 40 investors, including seniors planning for retirement.

According to the present-day FINRA report, LPL Financial most recently not only failed to supervise transactions and allowed potentially unsuitable class C and class B mutual fund purchases without adequate review, its suitability failures caused customers to incur nearly $550,000 in excessive sales charges.

Of similar concern, LPL Financial purportedly sent customers approximately 11,300 letters which materially misstated the sales charges and other fees associated with mutual fund or Unit Investment Trust transactions. For instance, FINRA wrote that LPL sent nearly 10,000 switch letters that erroneously stated UIT and direct business mutual fund switches had zero sales charges when, in fact, these transactions did cause customers to incur charges and other fees.

According to the documentation, one switch letter informed a customer of a 1% sales charge when, in fact, the customer was charged more than double the listed fee.

Finally, LPL also purportedly failed to adequately review unsuitable overconcentration in customer accounts which occurred when customers with low and moderate risk tolerance preferences wound up holding Business Development Company (BDC) positions at such high levels of concentration that the recommendations were excessively unsuitable.

According to FINRA, these unsuitably over-concentrated BDCs resulted in nearly $75,000 in realized customer losses.

If you invested with LPL Financial or any broker or investment adviser who unsuitably recommended an excessively risky product or failed to disclose sales charges, commissions, or other material facts, resulting in losses, excessive fees, or other damages, 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.

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