LPL Financial, LLC (LPL), for the third time in the last thirty days, has been fined by the Financial Industry Regulatory Authority (FINRA) for violation of securities industry rules and regulations relating to the protection of investors. This time LPL failed to implement and maintain adequate supervisory systems and procedures to monitor and ensure the timely delivery of mutual fund prospectuses as required by Section 5 of the Securities Act of 1933 (the "Securities Act"), NASD Conduct Rule 3010 and FINRA Rule 2010. FINRA investigators discovered that LPL failed to provide prospectuses to its customers who purchased mutual funds during the period of its investigation - 2009 through 2011 (the "relevant period"). FINRA estimated that LPL may have failed to deliver at least 3.4 million mutual fund prospectuses to its customers during that two year period. There is a high probability that LPL failed to deliver prospectuses in connection with the sale of other products during the relevant period and did not have procedures in place to ensure delivery of any prospectuses to its customers prior to the relevant period. The FINRA investigators found that at least as early as 2007, LPL was aware that its procedures were failing to ensure that its registered representatives were delivering the prospectuses as required under the federal and state securities laws.
The federal and state securities laws require the delivery of a prospectus to investors because it provides them with important information about the product being purchased. Our federal and state securities laws require disclosure of the details of the enterprise in which an investor's putting money so that he can be fully apprised and intelligently appraise the risks involved in his or her particular investment. Not only has LPL violated Section 5 of the Securities Act, but it has also violated Section 10 (b) of the Securities Exchange Acts of 1934 (the "Exchange Act"), which states the time prospectus must be delivered. A prospectus is required to be delivered by a securities broker-dealer before the transaction is complete on the settlement date of the transaction, which in the case of mutual fund transactions, and in most stock transactions, is no later than 3 business days after the order is placed.
The failure to deliver prospectuses in a timely manner is an extremely serious violation. It is not only a violation that can result in sanctions by securities regulator such as FINRA, but it can also give rise to a civil action or arbitration claim by an investor for rescission (to unwind the transaction) under both federal and state securities laws. Alternatively, an investor may recover damages for losses suffered in connection with an investment he or she made through LPL if that investor did not receive a prospectus in a timely manner.
Have you suffered losses resulting from an LPL stockbroker's failure to deliver a prospectus relating to an investment made through that brokerage firm? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at email@example.com for answers to any of your questions about this blog post and/or any related matter.