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Regulation and Compliance > Federal Regulation > SEC

Ex-LPL Broker to Pay $1.9M in Fraud Case

By Janet Levaux

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A district court judge in Georgia has ordered a former broker to pay roughly $1.9 million for taking some $1.7 million from at least seven investors.

The judgment, released late Thursday, was entered against Blake Richards, an ex-advisor affiliated with LPL Financial (LPLA) from 2009 to 2013. Earlier, he traded securities through Ameriprise Financial (AMP), A.G. Edwards and Edward Jones, FINRA records show.  

“The majority of the misappropriated funds constituted retirement savings and/or life insurance proceeds from deceased spouses,” the SEC said in its summary report. “Richards then instructed investors to write out checks to entities under his control with the understanding that Richards would invest their funds in fixed-income assets, variable annuities and/or common stock, and that none of these investments were made as represented.”

These investments did not appear on the clients’ brokerage account statements, according to the SEC. Richards didn’t receive any commission income from them, but he “siphoned off the funds entrusted to him for his personal use,” regulators said.

For its part, LPL Financial says one of its advisors informed the firm of allegations that Richards had misappropriated funds from certain LPL customers on May 1, 2013. The firm then launched an internal investigation and fired Richards on May 3, according to a spokesperson.  

It also notified regulators and law enforcement authorities, including the SEC, FINRA, State of Georgia, FBI and local law enforcement, of Richards’ alleged activities. “The company determined that none of the funds obtained by Mr. Richards from these customers were provided to Mr. Richards directly from LPL accounts,” LPL Financial said at the time.

Also in May 2013, the SEC moved to place a temporary restraining order on Richards related to the misappropriation of investor funds, and FINRA barred him from the industry. Authorities said Richards had engaged in the fraud schemes since at least 2008.

Richards conducted business through Lanier Wealth Management, as well as through Blake Richards Investments and BMO Investments.

“When confronted by LPL Financial as to the whereabouts of investor funds, Richards told LPL Financial that he cleared his clients’ investments through Goldman, Sachs & Co,” according to the SEC. “Goldman, Sachs & Co. has no record of Richards, Richards’ entities or Richards’ clients housing accounts at the firm or clearing accounts through the firm.”

In one case, an investor asked Richards to invest funds in Facebook’s IPO, which never occurred. In another, the client’s Social Security payments were garnished by the IRS after Richards failed to roll over IRA funds into other IRA accounts; the investors then became subject to income tax, interest and penalties for the distribution of the IRAs and the failure to report the distribution, regulators say.

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