2019
LPL Financial LLC will pay a $450,000 fine to the State of Texas and repurchase certain securities it sold to investors, Texas Securities Commissioner Travis J. Iles announced April 11.
The Consent Order with Texas is part of national settlement between state securities regulators and LPL over the brokerage firm’s long-standing and widespread regulatory failures that allowed the sale of unregistered and non-exempt equities and fixed-income securities to its clients.
Under terms of the settlement, LPL agreed to offer to repurchase from Texas investors the unregistered securities that were sold since Oct. 1, 2006. If the securities have been sold, LPL agreed to pay damages to the investor. LPL will pay 3% interest per year on the value of securities it pays in damages or by repurchasing.
“I am pleased with the robust and meaningful recovery to Texas investors and appreciate LPL’s work with regulators to achieve this outcome,” Commissioner Iles said. “The Securities Board further recognizes the tireless work of Joseph P. Borg, director of the Alabama Securities Commission, and Bryan J. Lantange, former director of the Massachusetts Securities Division, in shepherding the national settlement.”
Civil penalties paid to state regulators could exceed $25 million, according to the North American Securities Administrators Association, whose U.S. membership is comprised of the 50 state securities regulators and the District of Columbia.
The multi-state investigation focused on LPL’s retention, use, and subsequent cancellation of third-party services integral to LPL’s compliance with state securities registration requirements.
State securities regulators also examined other deficiencies in LPL’s controls, monitoring and reporting tools, and how it responded to significant compliance issues.
State securities regulators concluded that LPL offered and sold unregistered, non-exempt securities and failed to reasonably supervise the flow of information to ensure full and proper compliance with state securities registration requirements.
LPL failed to maintain adequate systems to reasonably supervise agents, staff, and employees to prevent the sale of unregistered, non-exempt securities.
State investigators also determined that LPL failed to maintain the books and records necessary to comply with state securities registration requirements.
LPL also acted negligently in canceling third-party services that were critical for compliance with state securities registration requirements; failed to supervise agents, staff, and employees to ensure compliance; and failed to invest sufficient resources in personnel, expertise, systems, and operations.
In addition to the fine paid to State of Texas, LPL will contribute $49,000 to the Investor Protection Trust, a nonprofit organization that supports investor education efforts in Texas and other states.