The office of Massachusetts Secretary of the Commonwealth William Galvin has fined LPL Financial (LPLA) $1M because the firm’s financial advisers allegedly made misrepresentations to consumers. According to the state regulator, the brokerage firm, which is based in Boston, failed to properly supervise its advisers located at Digital Federal Credit Union (DCU) branches.
LPL financial advisers are allowed to work out of the DCU in return for part of the concessions. However, noted Galvin’s office, the problem was that LPL’s advisers conducted their business as DCU Financial, a reference that could have cause customers to think that they worked for the credit union.
The Massachusetts regulator said that an undercover sting operation was put into place, during which time one LPL adviser allegedly claimed to work for DCU and said that he was not paid commissions for offering investment advice, which was a false statement. Also, DCU paid these advisers bonuses in a sales contest that LPL never authorized.
For example, according to the state’s consent order, from ’09 to ’11, DCU offered cash bonuses to its employees, including LPL Financial advisors. After 2012, the Credit Union issued bonuses for LPL Financial advisers that were determined by the commissions that they made.
It was just in January that LPL Financial settled with Galvin’s office for $3.7M over claims that one of the broker-dealer’s advisors sold unsuitable investments to senior investors. The Massachusetts regulator accused the brokerage firm of not properly supervising Roger Zullo, who is accused of selling illiquid variable annuities to older customers and retirees. Many investors allegedly were not able to access their funds for years. The securities sales earned Zullo over $1.8M in commissions over three years.
This is not the first time LPL advisers have been taken to task in Massachusetts for alleged improprieties involving senior investors. In 2015, the state fined the brokerage-firm $250K because a number of its representatives referred to themselves as retirement specialists or senior specialists. Both titles violate state laws. (In Massachusetts, an organization recognized by the state has to accredit a financial adviser for that person to use either title.)
Please contact one of our elder financial fraud lawyers, variable annuity fraud attorneys, or one of our broker fraud lawyers to explore your legal options. Shepherd Smith Edwards and Kantas, LTD LLP represents investors throughout the US.
Read the Consent Order (PDF)