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December 28, 2023 at 10:33 AM
LPL Financial agreed Wednesday to resolve allegations regarding transaction supervision issues that affected 125 clients between January 2012 and August 2019, including a payment of $5.5 million for a fine and $650,000 in restitution plus interest, according to an Financial Industry Regulatory Authority acceptance letter.
Between January 2012 and August 2019, LPL failed to reasonably supervise transactions that the firm’s registered representatives placed directly with product sponsors on behalf of clients — i.e., direct business transactions — in violation of FINRA Rules 3110 and 2010, the self-regulatory group says.
LPL did not take steps “reasonably designed” to ensure that its representatives reported such transactions on the trade blotter the firm used to identify potential sales practice violations, resulting in roughly 830,000 such transactions not appearing on the blotter, FINRA adds.
Plus, FINRA alleges, the firm did not adequately supervise these transactions since it did not generate exception reports that could help to identify potential sales practice violations, including potentially unsuitable transactions.
Likewise, for about 2 million additional direct business transactions, LPL also allegedly failed to ensure that it collected information related to clients’ investment profiles (such as their ages, investment time horizons and liquidity needs) relevant for making certain suitability determinations.
