The Securities Arbitration Law Firm of Klayman & Toskes ("K&T") (www.nasd-law.com)
announced today that the Financial Industry Regulatory Authority
("FINRA") fined LPL Financial (NasdaqGS: LPLA) $950,000 for supervisory
deficiencies related to the sales of alternative investment products,
including non-traded real estate investment trusts ("REITs"), oil and
gas partnerships, business development companies ("BDCs"), hedge funds,
managed futures and other illiquid pass-through investments. As part of
the sanction, LPL was also required to conduct a comprehensive review of
its policies, systems, procedures and training, and remedy the failures.
According to FINRA, "from January 1, 2008, to July 1, 2012, LPL failed
to adequately supervise the sales f alternative investments that
violated…concentration limits. At first, LPL used a manual process to
review whether an investment complied with suitability requirements,
relying on information that was at times outdated and inaccurate. The
firm later implemented an automated system for review, but that database
contained flawed programming and was not updated in a timely manner to
accurately reflect suitability standards. LPL also did not adequately
train its supervisory staff to analyze state suitability standards as
part of their suitability reviews of alternative investments."
FINRA further added, "In order to sell alternative investments, a
broker-dealer must tailor its supervisory system to these products. LPL
exposed customers to unacceptable risks by not having an adequate system
in place that could accurately review whether a transaction complied
with suitability requirements imposed by the states, the product issuers
and the firm itself - and it failed to train its registered
representatives to apply all the suitability guidelines appropriately."
In settling the matter with FINRA, LPL neither admitted nor denied the
charges, but consented to the entry of FINRA's findings.
The sole purpose of this release is to investigate, on behalf of our
clients, the sales practices of LPL in connection with the sale of
alternative investments to their customers. Current and former customers
of LPL who purchased alternative investments, and have information
relating to the manner in which the firm represented these products, are
encouraged to contact Steven D. Toskes or Jahan K. Manasseh of Klayman &
Toskes at (888) 997-9956, or visit us on the web at www.nasd-law.com.
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