FINRA Fines LPL $150K for Failure to Supervise Representative Who Conducted a Ponzi Scheme

LPL Financial, the nation’s largest independent broker-dealer, was fined $150,000 by the Financial Industry Regulatory Authority for failing to supervise a representative of the company who caused five LPL customers to transfer over $650,000 to an entity or accounts held at a third-party custodian that belonged to the representative, where they were converted by a third party.

From September 2018 through August 2019, LPL failed to investigate “red flags” that the representative was conducting undisclosed, investment-related business activities through the entity.

Supposedly, the regulator said LPL knew the advisor conducted minimal business through LPL. In September 2018, the advisor had earned less than $900 in annual compensation and stopped working for the firm. The branch officer reported that he would no longer supervise the account due to low production, according to FINRA.

In October 2018, the representative also disclosed in an annual firm compliance questionnaire that he used a social media networking website for business purposes without obtaining LPL’s approval to do so. FINRA reports that If the firm had checked his social media, the firm would have learned that the representative identified himself on his account profile as “Vice President, Investor Relations” for the entity and that he failed to disclose to LPL his affiliation with an investment-related outside business activity.

FINRA also says that LPL failed to identify or investigate red flags contained in emails sent to and from the representative’s LPL email address. The representative’s LPL email account received approximately 40 emails from the social media networking website reflecting that he had updated his profile to include references to work he performed on behalf of the entity.

According to the filing, in February 2019, the representative caused three LPL customers to surrender variable and fixed annuities and to send the proceeds via check to the entity. In addition, for one of the customers, the representative requested LPL send the total value of the customer’s accounts held at LPL via check to the Entity.

The advisor, who resigned from LPL in August 2019, was barred by FINRA in March 2021, according to FINRA.

LPL Financial, the nation’s largest independent broker-dealer, supports more than 21,000 financial advisors, 1,100 institution-based investment programs and 500 independent RIA firms nationwide.

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