LPL Financial Broker Barred by FINRA for Participating in Private Securities Transactions

Michael Babyak Jr. II, a former registered representative with LPL Financial LLC of Mine Hill, New Jersey, submitted a Letter of Acceptance, Waiver, and Consent in which he was permanently barred by the Financial Industry Regulatory Authority (FINRA) for allegedly engaging in private securities transactions without notifying his member firm.

Without admitting or denying FINRA’s findings, Michael Babyak Jr, of Randolph, New Jersey, was found to have solicited four LPL customers in a $4.25 million investment into a limited liability company (LLC) that he set up.  FINRA found that Mr. Babyak established the LLC into which the investors’ funds were pooled, was listed as the LLC’s registered agent, obtained a tax identification number, arranged for legal representation, and assisted in wiring funds from LPL accounts to the borrower and the LLC’s bank account. 

According to FINRA, Mr. Babyak caused the company to loan the initial investment of $4.25 million to a third party for the benefit of his customers, arranging for the funds repaid from the loan to extend loans to two additional borrowers.  FINRA stated that at no time did Mr. Babyak notify LPL Financial of his participation in these transactions, which violates NASD Rule 3040 and FINRA Rules 3280 and 2010.

Stockbrokers have been known to engage in many types of practices in violation of industry and firm rules, practices, and procedures.  In order to protect investors from stockbroker misconduct, FINRA rules require brokerage firms 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 brokerage firm’s own policies and procedures.  If broker-dealers and their supervisors fail to establish and implement these protective measures, they may be liable to investors for damages flowing from the misconduct.  As a result, investors who have suffered losses because of their stockbroker’s misconduct can bring forth claims to recover damages against broker-dealers, like LPL Financial, which should consistently oversee its stockbrokers in order to prevent the above-described prohibited conduct.

Have you suffered losses in your LPL Financial 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 LPL Financial stockbrokers for unsuitable recommendations, misrepresentations, and/or other unauthorized misconduct.

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 40 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, and/or visit our website at for answers to any of your questions about this blog post and/or any related matter.