LPL Financial Sanctioned for Failure to Supervise 

LPL Failed to Recognize Red Flags Related to Rep’s undisclosed business activities 

According to the Financial Industry Regulatory Authority (FINRA), the regulator has censured and fined LPL Financial $150,000 for allegedly failing to investigate red flags in connection with a representative’s undisclosed business activities. 

From September 2018 through August 2019, LPL purportedly failed to reasonably supervise transfers of funds by the Representative’s LPL customers to third parties, including a purported investment advisory firm or “Entity,” after which the customers’ funds were converted by a third party. As a result, LPL violated FINRA Rules 3110 and 2010. 

While associated with LPL, the rep allegedly caused five LPL customers to transfer funds from their LPL accounts, or from annuity contracts that the customers held, directly to the Entity or to accounts held at a third-party custodian for which the Entity was the advisor. The transferred funds were ultimately converted by a third party.  

In total, the rep caused five LPL customers to transfer over $650,000 to the Entity or to accounts held at a third-party custodian for which the Entity was the advisor, after which the funds were converted by a third party 

Undisclosed Business Activities 

FINRA Rule 3270 prohibits registered persons from being “an employee, independent contractor, sole proprietor, officer, director or partner of another person, or be compensated, or have the reasonable expectation of compensation, from any other person as a result of any business activity outside the scope of the relationship with his or her member firm, unless he or she has provided prior written notice to the member, in such form as specified by the member.” 

Failure to Supervise 

FINRA Rule 3310 requires brokerages “to establish and maintain a supervisory system that is reasonably designed to achieve compliance with applicable securities laws and regulations.” to learn more please see: What is Failure to Supervise? FINRA RULE 3110 (SUPERVISION) 

Brokerage firms are required to supervise their advisors to ensure that they are complying with FINRA rules. If it can be determined that the financial advisor violated FINRA rules and the employers failed to adequately supervise him, these firms can be held responsible for any resulting losses in a FINRA arbitration claim. 

FINRA Dispute Resolution is an arbitration venue for investors with claims against their brokerage firm or financial professional.  It provides investors with an opportunity to attempt to recoup their investment losses without filing such claims in court. 

For a free consultation with a securities attorney, please call the White Law Group at (888) 637-5510.   

 The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Seattle, Washington. For more information, please visit our website, www.whitesecuritieslaw.com.            

To learn more about LPL Financial please see: LPL Financial Lawsuit Alleges Unsuitable Alternative Investments