An Examination of LPL Financial’s Recent Regulatory Woes

shutterstock_173809013LPL Financial, LLC (LPL) is one of the largest independent brokerage firms in the United States employing approximately 13,840 registered reps and advisers. However, the firm’s growth has come with a host of regulatory actions focusing on the firm’s alleged supervisory failures.

Recently, InvestmentNews reported that the firm was hit with a $2 million fine, and ordered to pay $820,000 in restitution, for failing to maintain adequate books and records documenting variable annuity exchanges. The mounting firm fines have led to flat second quarter earnings at LPL.  The firm has stated that the company is instituting enhanced procedures with a view to ensuring that surrender charges incurred in connection with variable annuity exchange transactions are accurately reflected in the firm’s books and records as well as in any disclosures given to clients. The firm is also purportedly taking steps to make sure that its advisers are adequately documenting the basis for their variable annuity recommendations.

LPL has been on the radar of FINRA and several state regulators that have focused on the firm’s supervisory and other record systems as well as examining sales of investment products, including non-traded real estate investment trusts (REITs). In February 2013, LPL settled with the Commonwealth of Massachusetts to pay at least $2 million in restitution and $500,000 in fines concerning the firm’s non-traded REIT practices. In addition, in the last year, FINRA has fined LPL Financial $7.5 million for significant e-mail system failures. Moreover, we have reported on numerous LPL registered representatives who have been fined over the past year for a variety of misconduct ranging from misappropriation of funds, sales of alternative investments, selling away activities, and private placements.


According to InvestmentNews LPL has improved its oversight of complex products including non-traded REITs and variable annuities in order to avoid future regulatory and customer complaints. As part of the supervisory overhaul LPL has increased the number of employees in its legal and risk departments by 41% since 2013 and currently employs approximately 636 employees in areas focusing on compliance. Of these employees seventy work in product oversight. As part of the company’s plan, LPL will continue to increase its use of technology and automation in the oversight process.

The attorneys at Gana Weinstein LLP are experienced in representing investors in securities litigation matters against brokerage firms such as LPL. Our consultations are free of charge and the firm is only compensated if you recover.

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