FINRA announced on May 6th that it censured and fined LPL Financial LLC (“LPL”) $10 million for supervisory failures in a number of different complex investment areas, including the sales of non-traditional exchange-traded funds (“ETFs”), certain variable annuity contracts, non-traded real estate investment trusts (“REITs”) and other products, as well as its failure to monitor trades and deliver to customers more than 14 million trade confirmations. Moreover, FINRA ordered LPL to pay $1.7 million in restitution to certain customers who purchased non-traditional ETFs, and the firm may be fined additional compensation to ETF purchasers, pending a review by FINRA of its ETF systems and procedures.
With these sanctions, “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,” stated Brad Bennett, Chief of Enforcement at FINRA.
FINRA stated that concerning non-traditional ETFs, LPL did not have a system in place to monitor the length of time that customers held these securities in their accounts, did not enforce its limits on the concentration of the products in customer accounts, and failed to make sure that its brokers were adequately trained on the risks of these products. Additionally, LPL permitted sales of variable annuities without disclosing surrender fees. Furthermore, LPL failed to supervise non-traded REITs by failing to identify accounts for volume sales charge discounts. FINRA determined that LPL’s systems to review trading activity in customer accounts were inundated by many deficiencies including failing to alert for certain high-risk activity.
LPL neither admitted nor denied the charges, but consented to the payment of the settlement amount.
If you invested money with LPL, you may be entitled to recover some or all of your investment losses, and/or if you are an LPL customer who purchased non-traditional ETFs, you may be entitled to restitution. Please call our securities law firm toll free at (800) 975-4345 to speak with an experienced attorney and to find out how we may be able to help you regain some or all of your investment losses. Most cases are handled on a contingent fee basis, meaning that you do not pay legal fees unless we are successful in your lawsuit.