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LPL Financial Hit with $11.7 Million Fine for Failure to Supervise Investment Sales

LPL Financial LLC (LPL Financial) was fined $11.7 million by the Financial Industry Regulatory Authority (FINRA) for failing to maintain a proper supervisory system with respect to the sales of complex investment products, such as exchange-traded funds (ETFs), variable annuities, mutual funds, and non-traded real estate investment trusts.

Without admitting or denying the findings, LPL Financial consented to FINRA’s sanctions and findings that if failed to enforce its supervisory procedures for the sales of non-traditional ETFs, such as leveraged, inverse, and inverse-leveraged ETFs. Specifically, FINRA found that LPL Financial failed to enforce allocation limits with respect to customers’ investment objectives in its sales of non-traditional ETFs. LPL also failed to ensure that some of its registered representatives were adequately trained to sell the ETFs.

FINRA also found that LPL Financial failed to properly supervise the sales of variable annuity contracts, which were funded by the sale of other annuity contracts or mutual funds. Further, FINRA found that LPL Financial failed to conduct appropriate supervision or surveillance with respect to mutual fund “switch” transactions. According to FINRA, LPL Financial failed to enforce its procedures which require its representatives to complete timely and accurate forms to disclose mutual fund switches to customers and the reasons behind the switches.

FINRA’s Chief of Enforcement, Brad Bennet, stated: “With today’s action, FINRA reaffirms that there is little room in the industry for lax supervision and that it will not hesitate to order firms to review and correct substandard supervisory systems and controls, and pay restitution to affected customers.” FINRA ordered LPL Financial to pay $1.7 million to customers who were sold certain ETFs and also imposed a $10 million fine.

Brokerage firms are required, under FINRA rules, to establish and maintain a supervisory system in order to protect investors from unnecessary losses and/or broker misconduct. The implementation of these rules requires brokerage firms and their employees to ensure compliance with federal and state securities laws and securities industry rules and regulations, as well as the brokerage firm’s own policies and procedures. If broker dealers fail to implement and enforce these protective supervisory measures, they may be held liable to investors for losses. As a result, investors who have suffered losses stemming from a brokerage firm’s failure to supervise or a stockbroker or registered representative’s misconduct can file a claim to recover damages against brokerage firms like LPL Financial, which have a duty to supervise its employees in order to prevent unnecessary investor losses.

Have you suffered losses in your LPL Financial investment account due to your stockbroker’s inappropriate switches and/or unsuitable recommendations? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against LPL Financial and its brokers for failing to supervise and potentially causing unnecessary losses to investors.

For dedicated representation by a law firm with over 35 years of experience in all kinds of securities, commodities and investment disputes, contact us by telephone at 561-338-0037 or toll free at 800-732-2889, via e-mail or visit our website at www.secatty.com We may also be able to arrange a meeting with you at offices located in or in Boca Raton, Fort Lauderdale, Miami and West Palm Beach, Florida and elsewhere.