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Lincoln Financial Advisors Fined for Supervisory System Failures

Lincoln Financial Advisors Corporation (LFA) of Fort Wayne, Indiana submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) for allegedly failing to implement and enforce reasonable supervisory procedures related to the recommendation of private placement variable annuities (PPVA).  LFA has been a FINRA member since 1969 and has nearly 2,500 registered representatives and over 500 branch offices.

FINRA found that between October 2008 and April 2009, representatives from two of LFA’s branch offices recommended customers to invest in a hedge fund that engaged in a complex option trading strategy. FINRA alleged that the complexity of the hedge fund exposed the LFA clients to a high degree of financial risk. LFA however approved the recommendations and 25 firm customers invested approximately $11.7 million in the hedge fund. In 2010, the hedge fund was shut down.

Without admitting or denying the findings, LFA agreed to the FINRA sanctions that it failed to appropriately supervise and train its representatives in respect to the hedge fund and that the hedge fund recommendations were unsuitable for their clients. For violating  NASD Rules 3010(a) and (b) and 2110 and FINRA Rule 2010, LFA was censured and ordered to pay a $150,000 fine.

Stockbrokers have been known to engage in many types of practices which violate industry and firm rules, practices, and procedures. In order to protect customers from stockbroker misconduct, FINRA rules require broker-dealers such as Lincoln Financial Advisors Corporation to establish and implement a reasonable supervisory system. The implementation of the rules require supervisors to monitor employees to ensure they comply with federal and state securities laws, securities industry rules and regulations, and the firm, such as Lincoln Financial Advisors Corporation own policies and procedures. If broker dealers and/or their supervisors do not establish and implement these protective measures, they may be liable to investors for damages which flow from the misconduct. As a result, investors who have suffered losses because of their stockbroker’s unlawful or prohibited conduct can file a claim to recover damages against broker dealers like Lincoln Financial Advisors Corporation, which should consistently oversee its employees in order to prevent stockbroker misconduct.

Have you suffered losses in your Lincoln Financial Advisors Corporation investment account due to your stockbroker’s misconduct? 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 stockbrokers for unsuitable recommendations, misrepresentations, and/or other unauthorized and prohibited conduct.

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 35 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 post a comment, call (800) 732-2889, send Mr. Pearce an email at pearce@rwpearce.com, and/or visit our website at www.secatty.com for answers to any of your questions about this blog post and/or any related matter.