Massachusetts securities regulators fined independent broker-dealer LPL Financial $1 million for failing to supervise financial advisors working in Digital Federal Credit Union branches. They claim the LPL registered reps operating as credit union employees were part of securities sales contests in which they earned cash bonuses, used business “inconsistent and confusing” business cards and made “misleading statements” about their compensation.
“The credit union paid cash bonuses and operated sales contests to generate cash prizes based on commissions,” Commonwealth Secretary William Galvin said in a statement.
“What is worse – when my office did mystery shopping at one of the credit union locations, they were told by a dual credit union/LPL employee that the employee was paid by the credit union and did not receive commissions. This is not true,” Galvin explained.
According to Galvin’s office, LPL let its reps use a “doing business as” name, “which was essentially the same as the credit union. The use of the Digital Federal’s trade name in the broker-dealer business went “beyond the purpose of identifying where brokerage services [were] located.”
(The regulators also says the credit union had “inadequate signage” for at least one bank branch.)
“LPL has made a long-term commitment to enhancing our risk management and compliance structures. We are pleased to have resolved this matter with the Massachusetts Securities Division,” said the independent broker-dealer, which has one of its headquarters in Boston, in a statement.
As part of the settlement reached with regulators, LPL was censured and ordered to cease and desist from violating the Massachusetts securities law. The Boston-based broker-dealer and investment advisor also agreed to remove DCU from its business name on the Credit Union’s premises.
“Credit Union members are hardworking average investors who should not find themselves subject to these types of aggressive sales practices and misleading and confusing disclosures,” Galvin asserted.
LPL was also ordered to perform a comprehensive internal review of its policies and procedures, training and arrangements with Digital Federal, including the compensation and supervision of its reps and client disclosures of the relationship between LPL and the credit union.
— Check out LPL Checks In on 3 Trump Trades on ThinkAdvisor.