LPL Financial has been ordered to pay a $10 million fine to the Financial Industry Regulatory Authority for broad supervisory failures involving sales of nontraditional exchange-traded funds, certain variable annuity contracts, nontraded real estate investment trusts (REITs) and other complex products, as well as its failure to monitor and report trades and deliver to customers more than 14 million trade confirmations.
FINRA also ordered the San Diego-based LPL to pay nearly $1.7 million in restitution to certain customers who purchased nontraditional ETFs. LPL may pay additional compensation to ETF purchasers pending a review of its ETF systems and procedures.
LPL neither admitted nor denied the charges but consented to the entry of FINRA’s findings.
Brad Bennett, FINRA’s executive vice president and chief of enforcement, said in announcing the fine that “LPL’s supervisory breakdowns resulted from a sustained failure to devote sufficient resources to compliance programs integral to numerous aspects of its business.”
With Wednesday’s action, “FINRA reaffirms that there is little room in the industry for lax supervision and that it will not hesitate to order firms to review and correct substandard supervisory systems and controls, and pay restitution to affected customers.”
According to FINRA, at various times spanning multiple years, LPL failed to supervise sales of certain complex structured products, including ETFs, variable annuities and nontraded REITs.