Supervisory lapses lead to $150K fine for LPL Financial

LPL financial fined

LPL Financial has been censured by the Financial Industry Regulatory Authority (FINRA) because they failed to supervise an affiliated broker whose outside dealing led to over $650K in losses for one of its customers. They have also been fined $150K.

The red flags raised on account of the unidentified broker’s behavior were not picked up and acted upon by LPL, according to the letter of acceptance, waiver, and consent issued by FINRA.

The registered representative was seemingly using social media for carrying on business activities which was not an approved channel. Between September 2018 and August 2019, this usage was not acted upon by the firm, which, seemingly, looked the other way when it was happening. Unauthorized use was also made by the broker of his LPL email account, which was found to contain several emails with references to outside activities, mainly his work for an advisory firm of which he has claimed he was an executive.

The FINRA action was initiated when it reviewed a termination form filed by LPL in August 2019. It was noted by the self-regulating organization (SRO) that there were charges against the broker in an arbitration case regarding the movement of a customer’s account to a different firm, as well as document forgery to facilitate investment in a Ponzi scheme.

Investors should be cognizant of the risks associated with financial adviser fraud. You should know your rights if you fall victim to the SEC’s pursuit of investment advisors and corporations that have participated in the misconduct. Please get in touch with us for a free consultation if you think you may have been a victim of broker fraud.

A broker or financial advisor’s fiduciary responsibility is to look out for their client’s best interests

A broker or financial advisor must pass several exams before working. Exams such as the Series 7 and the General Securities Representative exam fall within this category. Successful candidates are registered with FINRA and are bound by its regulations. One of the sections on the exam is ethics and working in the client’s best interest.

Recently the SEC has adopted new rules that place a greater responsibility on financial counselors and brokers. Regulation in the Best Interest of the Consumer. The rules here are meant to make things more open and helpful for customers. However, authorities still haven’t agreed on a clear interpretation of the rule.

The functions of brokers and financial advisors have shifted during the past two decades. Brokers now do more than help clients place transactions; they also offer advisory services. This necessitates making judgments based on their familiarity with the market and the client’s financial situation. However, this doesn’t necessarily have to be done in the client’s best interest.

Examples of typical fraud committed by financial advisors

When financial consultants make intentional, major misrepresentations to their clients, they are committing fraud. Investors can file complaints with FINRA to recover losses by bad financial advisors.

Investors should always look into a financial advisor’s history before hiring them. FINRA and SEC are two places to consider a company’s legitimacy and customer complaints. It is also uncommon for financial counselors to exaggerate their experience and education. Many people fall prey to these scams. You should avoid salespeople who use pressure methods.

If you are unsure about your financial advisor or investment portfolio, please get in touch with our experienced investment lawyers for a free consultation.

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