LPL Financial is one the most prominent individual broker/dealer supporting more than 11,000 financial advisors throughout the nation, with headquarters in Charlotte, San Diego and Boston. LPL Financial was established in 1989 by the merger of Private Ledger (founded in 1973) and Linsco (established in 1968).
The merger was formed with the aim of creating a formidable alternative to Wall Street firms. LPL Financial sold 60% of its shares in 2005 to two private equity partners, LLC and Texas Pacific Group and Hellman & Friedman. LPL Financial is dedicated to providing service, education and training to its brokers. They also claim to provide brokers with leading-edge tools and technology and access to independent investment research.
LPL Financial Supervisory System Failure
The growth of LPL hasn’t been scandal-free, it has been subjected to lots of claims of securities law violation and stockbroker misconduct, in large part because of its smeared supervisory system. LPL Finance is an independent brokerage firm. LPL Finance brokers are essentially contractors, unlike brokers from firms like Morgan Stanley, Wells Fargo and Merrill Lynch.
LPL brokers get LPL email addresses and are subject to LPL compliance, however, they pay for their own working space, staff and other overhead. And because LPL Finance aloft costs are fairly low, it pays a huge amount of commissions to its brokers (between 75% to 95%). This is relative;y greater than what most well-known, full-service brokerage firms pay. However, the low-cost model of LPL has aided its explosive growth and this comes with major risks to investors.
Particularly, LPL Finance brokers typically work in small, one or two-person offices situated in rural America. These offices often do not have a supervisor on-site or compliance professional. As such, brokers are left to govern themselves ( be their own boss), which runs contrary to common sense and violates Financial Industry Regulatory Authority (FINRA) best practices. LPL appears to have let the cat guard the fish pond, exposing investors to stockbroker misconduct or investment fraud.
The little oversight and high payout have been a major factor that motivates LPL brokers to recommend and sell products with a high commission to investors regardless of whether the investment makes sense. This has made customers file numerous complaints accusing LPL of causing investment losses as a result of failure to oversee brokers.
Federal and state regulatory authorities have condemned LPL and its brokers for selling complex, high-commission investments to unsophisticated investors, hypothetical trading in customer accounts, and even outright stealing from clients.
LPL Fined Over Broker Disclosure Violations
The NASD and Financial Industry Regulatory Authority censured and fined Linsco/Private Ledger for failing to make required revelations about customer complaints. Such revelations should be made within 30 days. But several disclosures were years late or not revealed at all. The investigation resulted in censures and fines totalling $9.2 million against 29 firms, including LPL.
LPL Financial Faces Claims in Different States
Over the last year, forex and financial regulatory agencies in Massachusetts, Illinois, Oregon, Montana and Pennsylvania have penalized LPL for failure to supervise its brokers properly. For Instance, in Montana, an LPL broker name Donald Chouinard was sued and convicted for operating a Ponzi scheme. LPL paid Donal’s client $1.3 million and a $150, 000 regulatory fine after Mr Donald was sentenced to 10 years in prison. Montana regulatory body, however, believes nothing has changed in LPL Finance compliance culture. Montana Regulatory bodies are ready to bring further charges involving LPL’s sales of complicated real estate investment trusts, or non-traded REITs, to unsophisticated investors.
There is a similar case to the one mentioned above in Massachusetts, a regulatory body settled claims against LPL Finance for $2.5 million. The Massachusetts authority accused LPL of a complete lack of supervision after some broker improperly sold a risky high-commission product to clients.
Have you Invested with an Independent Brokerage?
Unless LPL and other similarly run independent brokerage firms improve their supervisory and compliance oversight of their brokers, fines and regulatory sanctions and clients-related arbitration claims will continue to increase.
Until then, as an investor, you should b careful of entrusting your money to brokers at independent brokerage firms. While it is tactful for investors to pay attention to their brokerage accounts, such attention should be incredibly close when accounts are held with independent brokerage firms.
If you want to get your money out of LPL Finance brokers like traders have been doing recently, due to the ever-increasing lawsuits. Get a fund recovery expert to help you. A fund recovery expert is a team of lawyers, financial advisers and regulatory agencies.
The Fund Recovery experts from Duolabs have recovered more than $2 million from banks and brokerage firms for their wrongful actions.