LPL Financial agreed Tuesday to pay $541,058 to senior citizens in Massachusetts after it failed to properly disclose surrender charges these clients paid when switching variable annuities.
In a memorandum of understanding with the Massachusetts Securities Division, LPL acknowledged that certain annuity switch transactions were conducted in “the absence of accurately disclosed surrender charges or in which other determinations were not properly documented.”
“It is vital that all investors, but especially senior investors, have full information when offered changes in their investments,” William Galvin, the Massachusetts secretary of the commonwealth, said in a statement. “When fees are not adequately disclosed, it puts investors at real risk causing significant damage to an investor’s return. I am pleased that this agreement will return these undisclosed costs back to senior investors. ”
LPL Financial said in a Monday statement that it was “pleased to have settled this matter in which we cooperated fully with the commonwealth of Massachusetts” during its investigation of LPL’s annuity switching practices from Jan. 1, 2009, to Dec. 31, 2013.
The agreement, which a Massachusetts Securities Division spokesperson told ThinkAdvisor “closes” the LPL matter with the division, covers 157 transactions for all persons 65 or older at the time of the transaction and living in Massachusetts.
LPL Financial must reimburse the investors within 15 days and submit a payment report to the Securities Division within six months.
LPL said in its statement that the independent BD “has made its compliance and controls one of the firm’s top priorities,” adding that the changes that LPL has implemented to its policies and procedures “substantially enhance the supervision of variable annuity exchange transactions.”
The changes, LPL continued, “are part of a broader effort to bolster the firm’s compliance and controls functions which strengthens our advisors’ and our firm’s ability to fully comply with all relevant rules and regulations.”