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LPL Financial News: Regulator Complaints and a $6.5 Million Fine

Sep 3, 2021 Failure to Supervise

LPL Financial has a lengthy history of investor disputes and regulatory actions. Investors should know these facts about their brokerage firm.  Brokerage firms do not always make it easy for investors to find this information. If you have lost money after investing with an LPL Financial advisor, Kurta Law offers free case evaluations.

What Does LPL Financial Do?

LPL Financial is a brokerage firm and an advisory firm. It comprises 14,000 financial advisors and 700 financial institutions. Keep in mind – advisory firms might operate under a different name, but still offer advisory services under the supervision of LPL Financial.

In addition to its brokerage and advisory services, the firm lists a total of 17 types of businesses on its record. This list includes the following:

  • Mutual fund retailer
  • Put and call broker or option writer
  • Municipal securities broker
  • Corporate debt security sellers
  • Private placements

What does LPL Financial Stand for?

LPL Financial started in 1989 when two brokerage firms called Linsco and Private Ledger merged. “LPL” stands for Linsco Private Ledger.

LPL Financial Corporate Headquarters Address

The headquarters are in San Diego, California.

Does LPL Financial Have a Good Reputation?

Investment firms must disclose their regulatory actions on a public database called BrokerCheck, which is maintained by the regulatory body FINRA. These regulatory actions are called “disclosures.” As of August 31, 2021, LPL Financial has 239 BrokerCheck disclosures on its record. You can see the full list of disclosures here.

LPL Financial Complaints

Two recent disclosures reveal significant allegations that the firm did not adequately protect investors from preventable financial losses.

FINRA Fines LPL Financial $6.5 Million

In recent LPL Financial news, FINRA fined the firm $6.5 million on December 31, 2020. The huge fine followed allegations that the firm did maintain a record retention system according to regulatory requirements.

FINRA further alleged that LPL failed to fingerprint non-registered persons and therefore failed to screen for criminal convictions. As a result, someone with a criminal history was associated with the firm. Specifically, FINRA discovered this person had been convicted of a misdemeanor for possession of a forged instrument – a conviction that disqualifies someone from associating with a FINRA firm.

LPL Financial also allegedly failed to review assets that brokers manually entered if brokers categorized them as “non-securities related.” One broker allegedly exploited this loophole, which allowed him to perpetrate a Ponzi scheme and steal $1,000,000 of investors' money.

You can read a copy of this AWC here.

Failure to Supervise

FINRA requires brokerage firms to maintain a supervisory system designed to catch brokers who engage in financial misconduct and risk losing investors’ money.

On July 30, 2020, the New Hampshire Bureau of Securities Regulation alleged that LPL Financial’s failure to supervise allowed advisor Daniel Stokes to perpetrate an investment fraud. Daniel Stokes allegedly solicited promissory notes from three clients for a “celebrity-backed” investment opportunity in Africa. New Hampshire alleges there was no investment opportunity and Stokes used the money for personal expenses. They further alleged that supervisors could have prevented the fraudulent scheme at several junctures.

New Hampshire fined the firm $400,000 and ordered they return lost funds to investors.

LPL Financial Reviews

Investors can rate brokerage firms on various review sites. On WalletHub, LPL Financial has 1.5 stars out of 5. Investors on Top Rated Firms rated it two stars. Many of the reviews mention “high fees” in their reviews.

LPL Financial Advisors

LPL is a brokerage firm and an advisory firm. That means they hire both SEC Registered Investment Advisers and FINRA brokers. Brokers and RIAs both might refer to themselves as “financial advisors” and many advisors are both brokers and RIAs. (Read this article for more information on the difference between RIAs and brokers.)

LPL Financial Advisors’ Fees

Registered Investment Adviser Fees

According to their Relationship Summary (Form CRS), LPL investment advisers charge a quarterly management fee based on the value of a portfolio – also known as Assets Under Management (AUM). They charge this fee regardless of whether investors buy or sell investments. Some accounts may also charge a per-transaction fee.

Broker Fees

Broker fees vary depending on what type of investments a client has.

  • LPL brokers charge a transaction-based fee every time you buy or sell an investment, which creates an incentive to encourage you to trade often.
  • Stocks and ETFs usually come with a separate commission, while bonds typically have the fee included.
  • Mutual funds and alternative investments come with asset-based sales charges, also known as “sales loads.” As you might expect, brokers are especially motivated to recommend investments that come with these types of sales charges.

What Should I Do If I Lost Money?

Investors should not accept financial losses that happened because of broker misconduct. You have six years from the time of the misconduct to file a Statement of Claim with FINRA. Often, firms require investors to settle their disputes through FINRA arbitration. The securities lawyers of Kurta Law specialize in the FINRA arbitration process and can help you can recover your investment losses. Call 877-600-0098 or email info@kurtalawfirm.com for a free case evaluation.