States Fine LPL $26M Over Unregistered Securities Sales

State securities regulators concluded that LPL offered and sold unregistered, nonexempt securities and failed to reasonably supervise the flow of information to ensure full and proper compliance with state securities registration requirements.

“The action today represents the states at their best — working together on an extremely important investor protection matter,” explained Commonwealth Secretary William F. Galvin, Massachusetts’ top securities regulator, in a statement. “Because of the states’ combined efforts, thousands of investors will benefit and be given the right to have their money returned plus interest.”

According to Borg, while regulators did not find evidence “of willful, reckless or fraudulent conduct by LPL, they did find that the firm failed to maintain adequate systems to reasonably supervise agents, staff and employees to prevent the sale of unregistered, nonexempt securities.”

State investigators also says that the IBD did not maintain books and records necessary “to ensure full and proper compliance with state securities registration requirements; and failed to conduct appropriate and necessary due diligence regarding the retention, use and subsequent cancellation of certain third-party services critical for compliance with state securities registration requirements.”

Furthermore, they point out, LPL acted negligently in its cancellation of third-party services “critical for compliance with state securities registration requirements; failed to supervise agents, staff and employees in the performance of duties with respect to systems operation, process, and checks and balances to ensure compliance with state securities registration statutes, rules and regulations; and failed to invest sufficient and appropriate resources in personnel, expertise, systems and operations to adequately comply with state securities registration statutes, rules and regulations.”

As part of the settlement, the IBD agreed to a full review “of the integration of new securities products to assess this firm’s ability to comply with all state securities registration requirements, and all operations and procedures in connection with state registration requirements, that apply to the offer and sale of that product.”

LPL also will conduct a similar review of its vendor-service protocols “to ensure processes are in place for identification and management of critical services” used in complying with state securities laws.

— Check out LPL Cuts Pricing Across Corporate, Hybrid RIA Platforms on ThinkAdvisor.