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Lincoln Financial Advisors

If you lost money with a Lincoln Financial Advisors Corporation broker, you may have a case for a securities fraud lawyer. Lincoln Financial Advisors Corporation (CRD #: 3978) is part of Lincoln Financial Group, which is a d.b.a. for Lincoln National Corporation. Lincoln Financial Advisors also does business under the name Sagemark Consulting. It has headquarters in Fort Wayne, Indiana.

Potentially Risky Securities at Lincoln Financial Advisors

Lincoln Financial Advisors offers additional securities besides stocks and bonds. These may all feature significant risks:

Variable annuities
Mutual funds
Exchange-traded funds
Alternative investment products
Variable life insurance
Unit Investment Trusts (UITs)
Closed-end funds
Securities-Backed Lines of Credit (SBLOCs)
Securities-Backed Loans (SBLs)

Broker Fraud and Misconduct

Brokers must uphold securities rules and regulations when they recommend securities. If an investment is overly risky for an investor’s profile, the broker may have violated FINRA Rule 2111 or Regulation Best Interest. If a broker recommends investments that are overly risky for an investor’s profile, the investor may be able to recover their losses.

Regulatory Actions

Lincoln Financial Advisors has 21 disclosures on its record. Below are only the three most recent – for a complete list, investors should review the firm’s detailed BrokerCheck record.

Ohio Division of Securities and Non-Traded REITs

The Ohio Division of Securities alleged that Lincoln Financial Advisors recommended non-traded REITs without reasonable grounds to determine the suitability of the REITs. Another regulatory action from Ohio alleged that the firm recommended non-traded REITs to at least eight clients based on forms containing inaccurate or incomplete information that did not establish that the purchases complied with the concentration limit outlined in the REIT prospectuses.

Non-traded REITs can be difficult (or impossible) to sell since they do not trade on a public exchange. This makes them highly illiquid and unsuitable for investors, who may need access to their funds.

FINRA Rule 3110 requires firms to supervise their brokers to ensure brokers follow applicable rules and regulations.

Allegations of Unsuitable Penny Stock Trading

In December 2015, Lincoln Financial Advisors consented to the findings that it failed to adequately supervise the activities of a registered representative who engaged in unsuitable penny stock trading. Penny stocks are too risky for most investors, and firms should therefore have a supervisory system in place that flags these types of transactions. Lincoln Financial Advisors entered into an these transactions appeared to be solicited, meaning that the broker sought out investors for these low-priced shares.

Allegedly, the firm’s reporting system was only flagging transactions of over $5,000, and Lincoln Financial Advisors allegedly did not take any steps to restrict the broker’s trading activity until after it started receiving customer complaints. According to the AWC, the firm paid over $616,000 in settlements.

Private Placement Variable Annuity (PPVA) Hedge Fund

In 2015, Lincoln Financial Advisors also consented to the findings that it recommended customers to invest in a hedge fund offered as a sub-account to a private placement variable annuity. The Acceptance, Waiver, and Consent agreement alleges that firm customers invested $11.7 million in the hedge fund before it was shut down.

The firm allegedly failed to evaluate the hedge fund recommendations for customer-specific suitability. Private placements and variable annuities come with complex risks that are not suitable for most investors.

As part of the terms of the AWC, Lincoln Financial Advisors consented to a fine of $150,000.

Relationship Customer Summary: Fees and Conflicts of Interest

Regulation Best Interest requires brokerage firms to provide a Relationship Customer Summary (Form CRS) that discloses the firm’s conflicts of interests, transaction fees, and whether the firm has disciplinary history. The Form CRS encourages investors to ask their brokers about these conflicts of interest.

There are fees associated with some of the products that Lincoln Financial Advisors offers. These fees can create a conflict of interest.

Lincoln Financial Advisors states in its Form CRS: “Our receipt of fees creates conflicts for us because you pay more, and we receive more compensations when you trade more, use margin loans, SBLs, and SBLOCs, and take other fee-generating actions.”

Lincoln Financial Advisors customers may also pay the following fees. (This is not a complete list. For a complete list, see the Form CRS.)

Sub-transfer agency fees
Management fees
Administrative fees
Servicing fees
Insurance fees
Fees for trades not executed by National Financial Services
Service and handling fees
Options exercise and management fees
Inactive account fees
Cash management account fees
Retirement account maintenance fees
Asset transfer and account termination fees
Interest on: Margin loans, SBLOCs, and SBLs.
Mutual fund 12b-1 fees
Third-party payments: Lincoln Financial Advisors has a conflict of interest due to payments offered by certain product issuers, sponsors, or managers. For instance, Lincoln Financial Services uses National Financial Services as its custodian. NFS pays Lincoln Financial Services for SBLOCs.
Lincoln Financial Advisors conducts principal trading. “Principal trading” means the brokerage firm is selling securities from its own accounts. Your broker has a financial incentive to recommend these securities to you over investments that may have similar benefits offered by another dealer.