Articles Tagged with LPL Financial

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Mark Brian Degner, of Shady Cove, Oregon, submitted a Letter of Acceptance, Waiver, and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for negligently making material misstatements regarding the sale of 20-year CDs to elderly customers.  According to FINRA, the customers suffered losses of approximately $75,000 as a result of investing in the misrepresented CDs.

FINRA found that, while employed by LPL Financial LLC, Mark Degner misrepresented  20-year interest rate-linked CDs to his customers by stating that the CDs were not subject to any survivor benefit limitations when, in fact, they were.  The survivor benefits of the CDs were subject to a limitation that restricted the amount of early redemptions among purchasers.  While the issuer’s disclosure statement disclosed this information, Mr. Degner failed to review this information and recommended that his customers purchase CDs totaling $685,000.  As a result of the survivor benefit limitation, the estates of two of the customers were not able to fully redeem their CDs and suffered losses of approximately $75,000.  Without admitting or denying FINRA’s findings, Mark Degner was fined $7,500 and suspended for 20 business days.  The suspension was in effect from March 5, 2018 through April 2, 2018. Continue reading →

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Roger Zullo, a former registered representative with LPL Financial LLC, has been barred by the Financial Industry Regulatory Authority (FINRA) for refusing to produce information and documents requested by FINRA in connection with an investigation into allegations of fraud, falsifying client suitability profiles and unsuitable variable annuity sales.  FINRA’s investigation arose from a complaint, and subsequent Consent Order, by the Massachusetts Securities Division against Mr. Zullo and LPL Financial.

FINRA began an investigation in January 2017 following allegations made in the complaint filed by the Massachusetts Securities Division.  That complaint alleged that Mr. Zullo, of Boston, Massachusetts, “fabricated the financial suitability profiles of numerous LPL clients, selling them scores of large, illiquid, unsuitable, high-commission variable annuities, at substantial upfront profits to himself and LPL.”  Further, the complaint alleged that Mr. Zullo prematurely switched out his clients’ existing annuities (which were also sold by Mr. Zullo), caused unnecessary surrender charges, and disregarded his clients’ investment profiles at an enormous profit to himself and LPL. The complaint states, “Over the course of three years, Zullo and LPL received more than $1,825,000 in variable annuity commissions alone; of this amount, more than $1,791,000, or 98%, represented commissions from the sale of the same annuity product, the Polaris Platinum III (B Shares) variable annuity.” Continue reading →

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Steve Dale Heath, of Newport News, Virginia, submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) for allegedly executing unsuitable mutual fund trades, including switches, in the account of an elderly customer with conservative investment goals, causing the customer to suffer losses of approximately $7,207.

FINRA alleged that Steve Heath recommended and effected short-term mutual fund trades in the account of an elderly customer.  Mutual funds are intended as longer-term investments. However, Mr. Heath allegedly recommended selling after only 249 days on average.  Further, some of the trades involved mutual fund switches, which were allegedly unsuitable for his customer in light of the customer’s conservative investment objectives. Mutual fund “switching” is simply the process of transferring an investment from one mutual fund to another, sometimes for good reasons and other times to defraud clients. Some brokers attempt to effect numerous switches in client accounts in order to generate commissions.  Continue reading →

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Scott Goldman, a stockbroker formerly registered with LPL Financial Corporation (LPL Financial), submitted a Letter of Acceptance, Waiver and Consent (AWC) to the Financial Industry Regulatory Authority (FINRA) in which he was fined $10,000 and suspended for 20 days for allegedly making unsuitable recommendations of a leveraged, overconcentrated precious metals investment to an elderly widow.

According to FINRA, Mr. Goldman used several different investment strategies (referred to as “Champion Models” by Mr. Goldman) in which he invested his customers’ accounts in mutual funds with a mutual fund family or through subaccounts of a variable annuity.  FINRA found that one of Mr. Goldman’s Champion models was the “Champion Precious Metals Model,” which was identified as the most risky due to the fact that it was concentrated in the volatile precious metals sector.  Further, the Champion Precious Metals Model used leveraged mutual funds, furthering the risk to investors. Continue reading →

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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.  Continue reading →

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Mark Tauzin, a former registered representative with LPL Financial LLC submitted a Letter of Acceptance, Waiver and Consent (AWC) in which he was suspended and assessed a deferred fine of $20,000 by the Financial Industry Regulatory Authority (FINRA) for engaging in unsuitable short-term trading of front-loaded Unit Investment Trusts (UITs) which resulted in sales charges to the customers of more than $316,000.

According to FINRA, Mark Tauzin, of Lafayette, Louisiana, effected 215 UIT transactions in the accounts of 14 households that were sold within a 12 month time period.  UITs are not designed to be used as trading investments, particularly not to be used for short-term trading, and typically carry significant upfront charges.  As a result of Mr. Tauzin’s unsuitable UIT transactions, the customers incurred sales charges of $316,840.50 and Mr. Tauzin received $205,115.02 in commissions. Continue reading →

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The Department of Enforcement of the Financial Industry Regulatory Authority (FINRA) filed a complaint against George Zedan, of Whittier California, for allegedly converting a client’s funds for his own personal use. Mr. Zedan entered the securities in 1998 and later in April 2004, when he became associated with FINRA member firm LPL Financial, LLC (LPL). Mr. Zedan remained associated with LPL until March 2013 when he resigned from the firm while under police investigation.

FINRA alleges that Mr. Zedan, while associated with LPL, took advantage of an elderly client by using their funds for his own personal use. FINRA also alleges that Mr. Zedan proposed a false and inappropriate real estate investment strategy for an 87 year old client. According to the complaint, Mr. Zedan in 2012, started to discuss a $300,000 investment in a real estate venture with the client, none of which was put down on paper. After agreeing to the proposition, the client allegedly, under the direction of Mr. Zedan, wrote a personal check for $300,000 and with the memo line reading “real estate” and handed it to Mr. Zedan. A week later, September 4, 2012, Mr. Zedan deposited the check into his personal banking account and started using the funds for his own personal expenses. Continue reading →

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Walter Rae Chao, a former broker with the San Mateo, California branch of LPL Financial, LLC (LPL Financial), submitted a letter of Acceptance, Waiver, and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) findings that he participated in private securities transactions totaling $1.27 million without the required approval from LPL Financial.

FINRA found that Walter Chao, of Redwood City, California, introduced at least 13 clients to purchase interest in special purpose vehicles (SPV), which were created by another firm, in order to purchase pre-initial public offering (IPO) shares of Facebook, Inc. Nine of the 13 clients invested a total of $1.27 million in the Facebook SPVs. FINRA stated that although Mr. Chao did not receive direct compensation from the other firm for the transactions, approximately $8,000 in fees associated with Mr. Chao’s mother’s purchase of the Facebook SPV were waived. Continue reading →

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The Department of Market Regulation of the Financial Industry Regulatory Authority (FINRA) received a Letter of Acceptance, Waiver and Consent (AWC) from LPL Financial LLC (LPL Financial) for allegedly purchasing from and selling municipal securities to customers at prices that were not fair or reasonable.

The Department of Market Regulation conducted two reviews of LPL Financial related to the firm’s compliance with municipal bond fair pricing requirements and corporate bond fair pricing requirements. During the municipal bond review between January and March 2009, FINRA found that for twelve transactions. LPL Financial purchased municipal securities for its own account from a customer and/or sold municipal securities for its own account to a customer at an aggregate price that included and commissions or service charges. FINRA alleged that such actions were not fair or reasonable and did not represent the best judgment of the broker as they didn’t express the fair market value of the securities.

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The Department of Market Regulation of the Financial Industry Regulatory Authority (FINRA) received a Letter of Acceptance, Waiver and Consent (AWC) from LPL Financial LLC (LPL Financial) for allegedly failing to execute several trade orders fully and promptly, reporting improper data and failing to properly supervise.

The Department of Market Regulation conducted two reviews of LPL Financial in 2012 to examine its trading and reporting methods. During its Trading and Market Making Surveillance (TMMS) review, FINRA found that in four instances, LPL Financial failed to execute orders fully and promptly. During the review, FINRA also found that LPL Financial transmitted to OATS eights reports that contained inaccurate, incomplete, or improperly formatted data. Additionally, the TMMS review found that LPL Financial failed to transmit two Reportable Order Events to OATS and failed to show the correct order receipt time on the memorandum of ten brokerage firms.

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