LPL Financial LLC., the nation’s largest independent broker-dealer, will pay a settlement totaling $26 million over the sale of unregistered securities, stemming from an investigation led by regulators in Massachusetts and Alabama and the North American Securities Administrators Association.
The regulators claim that LPL had been negligent in its duty to supervise its agents and employees and to prevent the sale of unregistered securities to its customers over the past 12 years.
The investigation focused on LPL’s retention, use, and subsequent cancellation of certain third-party services integral to its compliance with state securities registration requirements. The regulators concluded that the brokerage giant offered and sold unregistered, non-exempt securities and failed to reasonably supervise the flow of information to ensure full and proper compliance with the states.
Joseph Borg, NASAA president and director of the Alabama Securities Commission said LPL fully cooperated with the regulators who found no evidence of willful, reckless, or fraudulent conduct by LPL.
“The action today represents the states at their best – working together on an extremely important investor protection matter,” said William Galvin, Massachusetts’ top securities regulator. “Because of the states’ combined efforts, thousands of investors will benefit and be given the right to have their money returned plus interest”
Customers who were sold unregistered, non-exempt securities since October 2006 will be offered the full amount paid, plus 3 percent interest. LPL has also agreed to fully review its compliance with all state securities requirements.
Each of the jurisdictions participating in the $26 million settlement – 49 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands – will receive $499,000 upon entering a final consent order with LPL. California will not participate in the settlement at this time.
LPL Financial LLC, a wholly owned subsidiary of LPL Financial Holdings Inc. (NASDAQ: LPLA), serves more than 14,000 financial advisors and 700 financial institutions that oversee approximately $651 billion in brokerage and advisory assets, as of February 28, 2018.