LPL Financial

FINRA Orders LPL Financial to Pay $7.5M Over Allegedly Inadequate Supervision of E-Mails

Published on: May 23, 2013 | by Shepherd Smith Edwards & Kantas, LLP

In what is being called the SRO’s largest fine to date over e-mail violations, the Financial Industry Regulatory Authority announced that it is fining LPL Financial LLC $7.5 million over 35 key e-mail system failures. The financial firm also has to set up a $1.5 million fund to compensate customers that may have been impacted. That is a total of $9 million.

According to FINRA, the e-mail and retention issues took place between 2007 and 2013, with LPL’s systems failing a minimum of 35 times. The brokerage firm allegedly did not fulfill its duty to supervise representatives, capture email, and answer regulator requests.

For more than four years, LPL purportedly did not supervise 28 million business emails that involved thousands of independent contractor representatives. The broker-dealer also is accused of making misstatements to the SRO during the latter’s investigation into the matter (email systems failures made it impossible for the firm to give over certain documents).

LPL Financial Ordered to Pay $7.5M FINRA Fine Over E-Mail Failures

Published on: May 22, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority says that LPL Financial LLC must pay a $7.5 million fine for inadequately supervising more than 28 million business emails between 2007 and 2013. This is the largest fine the SRO has ever imposed over an e-mail case.

According to FINRA, LPL’s systems for overseeing and storing e-mails failed a minimum of 35 times. It contends that the firm did not succeed in fulfilling its duty to retain e-mails, supervise its representatives, and properly respond to requests by regulators. The SRO attributes these problems to the brokerage firm’s failure to put enough resources toward updating its e-mail system as its business grew quickly.

Among the e-mail failures:

LPL Financial Continues to Stay On Regulators’ Radar

Published on: April 10, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to a number of state and federal regulators, they are continuing to keep their eyes on LPL Financial (LPLA), the fourth biggest brokerage firm in the US after Wells Fargo (WFC), Morgan Stanley (MS)and Merrill Lynch (MER). With 13,300 brokers, 4.3 million customers, and 6,500 offices, it is the biggest broker-dealer in rural America.

Yet even as LPL has grown, so has the number of censures it, and its brokers have been faced with numerous allegations, including securities fraud, selling unsuitable investments to unsophisticated investors, and speculative trading in client accounts. Just in the last 18 months, regulators in Massachusetts, Illinois, Oregon, Montana, and Pennsylvania have imposed penalties on LPL for inadequate broker supervision.

LPL’s recent fast growth can in part be attributed to the 2008 economic crisis, which caused many investors to flee from more prominent brokerage firms and into the arms of independent broker-dealers. Brokers at firms such as LPL are not employees but contractors that are able to earn a huge percentage of the fees and commissions. The supposed advantage for investors is that independent broker-dealers don’t have their own investment products that they are trying to foist onto customers.

However, some analysts believe that the bigger commissions that LPL has to pay its brokers means that the firm has less cash for compliance and is more prone to draw in brokers wanting to get around the rules. Evidence of possible problems from this independent broker system can be found in Montana, where 31 LPL brokers were named in eight securities complaints in the past five years. According to the state, almost half of the LPL brokers there are registered there as their own supervisors. In Washington State, authorities filed a case against LPL last year because a broker allegedly sold nontraded real estate investment trusts to dozens of older investors.

Fast-Growing Brokerage Firm Often Tangles With Regulators, New York Times, March 21, 2013

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As Brokers Peddle Junk-Loan Funds, Franklin Square Raises Billions of Dollars, Stockbroker Fraud Blog, April 9, 2013

Federal Workers’ Privacy Rights if STOCK Act Provision Mandating Online Disclosure of Financial Data Goes Into Effect, Says District Court Judge, Institutional Investor Securities Blog, April 8, 2013 Continue Reading ›

LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients

Published on: November 29, 2011 | by Shepherd Smith Edwards & Kantas, LLP

LPL Financial must pay $100K for its improper supervision of a broker. The Oregon Division of Financial and Corporate Securities, which fined the financial firm, reports that LPL Financial has put in place better oversight procedures since the violation was discovered. LPL Financial is a LPL Investment Holdings Inc. division.

According to the state’s securities division, Jack Kleck, an LPL Financial branch manager, sold risky gas and oil partnership-related investments to almost 36 residents. A lot of these clients were elderly seniors for whom these investments were unsuitable (considering their investment goals and age). Some even lacked the mental capacity to make such investment choices.

LPL Financial is accused of committing securities law violations, including not making sure that company procedures and policy were enforced and inadequately supervising Kleck, whose securities license was taken away in 2007. He was ordered to pay a $30,000 fine.

LPL Financial Management and Private Equity Backers TPG and Hellman & Friedman Could Make Over $450M from IPO

Published on: November 19, 2010 | by Shepherd Smith Edwards & Kantas, LLP

Investors are jumping on LPL Financial Management’s initial public offering debut. At midafternoon on Wednesday, shares were up 8% at $32 plus change. (This, compared this to the 6% increase in GM’s IPO.) According to CNN, the Boston-based brokerage service and private equity backers TPG and Helllman & Friedman may make than $450 million from the deal.

LPL provides research, technology, and financial services to 12,000 independent financial advisers in small and medium-sized shops. This allows them to provide services, including financial advice that is supposed to be free from conflict or bias, to retail investors. Seeing as there have been so many alleged incidents recently reported of bankers trying to earn fees by pressing clients to take part in certain deals, LPL says in its IPO prospectus that it make sense that today more investors are drawn to independent advisers. The brokerage service company also says that over the last decade, as rich individuals and brokers have started to question the benefits of dealing with the larger banks, its broker clientele as gone up at a 13% compound annual rate.

That said, the investment adviser system-whether involving independent advisers or those with ties to investment banks-is far from perfect. As Shepherd Smith Edwards & Kantas LTD LLP founder and securities fraud lawyer William Shepherd points out, “We have seen a number of complaints regarding LPL which seemed to stem from failure to supervise. Perhaps this is because LPL has so many advisor/agents in one or two person offices having somewhat detached contact with their supervisor(s). It was recently reported that LPL may have sought to hire another firm to handle its supervisory duties.”

LPL CEO Mark Casady and President COO Esther Stearns are expected to make millions from the IPO-almost $58 million for Casady and $35.1 million for Stearns. LPL executive William Dwyer could make $8.24 million, while the shares that General Counsel Stephanie Brown plans to sell could make her $3.77 million.

Related Web Resources:
LPL Financial IPO outpaces GM, CNN Money, November 18, 2010
LPL Executives Likely To Reap Millions In Public Offering, The Wall Street Journal, November 18, 2010
LPL Investment IPO Faces Struggle, The Street, November 15, 2010 Continue Reading ›

LPL Investment Holdings, Inc. IPO Registration Gives Evidence of Disparities Between Wirehouse Broker-Dealers and Independent Brokerage Firms

Published on: June 21, 2010 | by Shepherd Smith Edwards & Kantas, LLP

According to InvestmentNews, LPL Investment Holding Inc’s recent IPO registration is clear evidence that the 4 wirehouse brokerage firms still dwarf the approximately 1,200 independent contractor broker-dealers when it comes to controlling client assets. LPL is an independent broker-dealer.

Currently, there are approximately 114,000 independent reps and about 55,000 wirehouse reps. Yet even though there are so many less wirehouse reps, they still are in charge of a larger pool of client assets than their independent counterparts. While wirehouse reps manage $3.95 trillion in client assets, independent reps handle about $1.8 trillion. This means that a wirehouse broker, on average, manages $71.8 million in assets, and independent reps manage about $16 million in assets.

Also, while both wirehouse and independent reps make about 1% in commissions and fees on client assets, wirehouse reps get a 40% average payout of the fees and commissions, while independent reps get about 85%. While the average independent rep makes under $134,000 annually, the average wirehouse rep makes about $287,000 a year.

LPL rep’s earn an average payout of about $155,360. Acquired by two private equity firms in 2005, LLP states in its IPO registration that due to its efficient operating model and scale, its payout to independent contractors far exceeds that of wirehouse firms. InvestmentNews says it is unclear how many of the $1 million plus-producing brokers joined LPL because they wanted the higher payout.

LPL is owned by private equity firms Hellman & Friedman LLC and TPG Capital. The brokerage firm has filed to raise up to $600 million in its IPO.

Related Web Resources:

Does LPL’s filing reveal an unspoken truth about indie B-Ds?, Investment News, June 21, 2010
TPG-Backed LPL Investment Holdings Files for $600 Million IPO, Bloomberg Businessweek, June 4, 2010 Continue Reading ›

Linsco Private Ledger Clients File FINRA Arbitration Claims Accusing Former Financial Adviser Raymond Londo of Running Multi-Million Dollar Ponzi Scam

Published on: April 13, 2010 | by Shepherd Smith Edwards & Kantas, LLP

A number of FINRA arbitration claims have been filed accusing former Linsco Private Ledger (LPL) financial advisor Raymond Londo of running a multi-million dollar Ponzi scheme to defraud investors. The claims allege fraud, conversion, misrepresentation and omissions, and negligence. LPL is accused of failing to supervise, discover, and stop the investment fraud scheme within a reasonable amount of time even though there were numerous signs, such as red flags and customer complaints, to indicate that Londo should have been more closely supervised or even fired.

Per the FINRA statement of claim, for nearly 10 years Londo accepted funds from LPL clients. He told them that he was investing their money in an LPL account where he could help them avail of exclusive investment opportunities. The former LPL financial adviser would then take the money he was supposed to invest and used it to support his lavish lifestyle and gambling addiction.

Linsco finally fired Londo in March 2008, but by then funds belonging to 95% of the victims had been stolen. Londo’s victims, located in different parts of the US, included his own neighbours, family members, and fellow country club members.

Soon after the Ponzi scam was discovered, Londo died.

LPL is one of the largest brokerage firms in the US. The alleged Ponzi scam surrounding Londo is not the first time the broker-dealer has been linked to securities fraud allegedly committed by one of its employees. In 2002, FINRA awarded more than $500,000 to an investor who claimed investment losses because LPL did not properly supervise one of its independent brokers.

In 2008, LPL Financial and Michael McClellan, one of its ex-brokers, lost a $1.8 million arbitration claim accusing them of securities fraud, violation of securities laws, unauthorized tradings, breach of fiduciary duties, and other violations.

Securities Fraud Law Firm Shepherd Smith Edwards & Kantas LTD LLP Investigates Ray Londo, Londo Financial Group, and Linsco Private Ledger For Improper Lending/Borrowing of Client Funds

Published on: October 20, 2008 | by Shepherd Smith Edwards & Kantas, LLP

Securities fraud attorneys at the stockbroker fraud law firm of Shepherd Smith Edwards & Kantas LTD LLP are investigating claims for clients of Ray Londo, Londo Financial Group, and Linsco Private Ledger (LPL). The firm is asking any clients of Ray Londo that lent him or anyone else in his company money to call (800) 259-9010.

According to the Financial Industry Regulatory Authority, Ray Londo was fired from LPL this year because of his failure to abide by company policy related to borrowing from or lending money to clients. FINRA registered representatives are not supposed to borrow money from clients or accept checks issued directly to a broker.

FINRA Rule 2370