$10 Million Fine Imposed On LPL: Supervisory Failures

The Financial Industry Regulatory Authority (“FINRA”) recently imposed a $10 million fine on LPL Financial LLC, the largest independent broker-dealer in the United States. FINRA sanctioned LPL Financial as a consequence of the company’s numerous supervisory failures. The underlying supervisory deficiencies accompanied the sale of non-traditional ETF variable annuities, non-traded REITs, and other complex products. Additional information on the circumstances surrounding FINRA’s sanction of LPL Financial can be found here.

As a means of protecting the interests of their customers, broker-dealers such as LPL Financial are entrusted with the obligation to vigorously supervise the conduct of their associated persons, including their registered representatives. All too-often, however, broker-dealers fail to discharge their supervisory responsibilities. In doing so, they embolden dishonest registered representatives – and thereby heighten the dangers to which their customers are exposed. Simply put, disreputable registered representatives who are intent on pocketing large, instantaneous commissions may be inclined to capitalize on a loosely-supervised environment by, among other things, engaging in “selling away” (wherein the sale of unapproved securities is concealed), or by participating in unauthorized outside business activities.

It is important to keep in mind that when a dishonest registered representative has victimized an array of customers by playing “fast and loose” while ignoring the regulations governing his conduct, the employing broker-dealer is not likely to “step up to the plate,” and make full disclosure to its customers. Fearful of liability, the brokerage firm will, in all likelihood, strive to “sweep everything under the rug,” and deflect any inquiries that might be made.

If you have invested your savings in a stock offering that has “gone bad,” you should not count on your brokerage firm to level with you. Protect your interests; take the initiative and give Chris Bebel a call, if you suspect wrongdoing.