LPL Financial Reaches $26 Mln Settlement over Brokers’ Sale of Unregistered Securities
LPL Financial has agreed to pay up to $26 million to settle charges from state regulators that it was “negligent” in supervising sales of unregistered securities to thousands of investors over 12 years, according to an announcement on Wednesday.
The largest employer of independent brokers acceded to paying $499,000 to each of 52 states and U.S. territories, and to repurchase the unregistered equity and fixed-income securities that have been sold since October 2006, according to regulators in Alabama and Massachusetts who led an investigation on behalf of the North American Securities Administrators Association.
LPL will repay the purchase price of the securities plus 3% interest, the regulators said. The firm, which is the largest independent broker-dealer with over 15,000 affiliated brokers, also agreed to undertake a “full review” of its state securities “blue-sky” compliance obligations.
“We take our compliance and risk management obligations seriously and will continue to dedicate resources to this important work moving forward,” LPL spokesman Jeffrey Mochal said in a statement. “Our focus now is on offering remediation to investors who may have been affected.”
California has not agreed at this time to participate in the settlement, but if it does, the states and territories will receive a total of $26 million, LPL said. A spokesman at California’s Department of Business Oversight did not immediately respond to a request for comment on its plans.
A spokeswoman for Massachusetts Secretary of the Commonwealth William Galvin said there are no parallel investigations from federal authorities of LPL and its brokers. The firm last year agreed to pay Massachusetts $3.7 million for failing to supervise a broker subsequently barred for annuities sales fraud.
State and federal regulators often engage in turf battles over securities regulation.
“This investigation is representative of the aggressive and coordinated enforcement actions of state securities regulators,” Alabama Securities Commission Director Joseph Borg said in a prepared statement, “and demonstrates the important investor protection role states serve in safeguarding investors nationwide.”