In terms of gross revenues and number of financial advisors, LPL Financial is ranked as the biggest independent broker dealer in the financial services industry. The company has financial advisors all over the U.S., mostly in small branch offices. And because there are so many small branch offices, LPL has several supervisory challenges.
LPL Financial was formed in 1989 as the result of a merger of two small brokerage firms: Linsco and Private Ledger. The original name was Linsco/Private Ledger, and that became LPL Financial, LLC in January of 2008.
LPL Financial, LLC has been involved in several regulatory investigations, some of which have ended in disciplinary actions.
Retired Investor Awarded Damages for Unsuitable Variable Annuity Recommendations
In February of 2005, a retired investor was awarded $371,938 from a NASD arbitration panel due to recommendations in connection with a variable annuity. This included $247,680 in punitive damages. According to arbitrators, the LPL Financial advisor offered unsuitable investment advice related to the distribution of funds in the variable annuity based on the age, investment experience, and financial goals of the investor.
Failure to Supervise Sale of Variable Annuity Results in NASD Award
In December of 2005, a NASD arbitration panel awarded $1,344,049 to a retired physician for unsuitable investment advice from an LPL Financial advisor. The claimant sought damages of $1.5 million, alleging several violations, including unsuitable advice, breach of fiduciary duty, and failure to supervise. The investments were related to mutual funds and a variable annuity.
Advisor Mortgages Widow’s Home for Annuity Purchase
In June of 2012, an LPL Financial advisor agreed to FINRA sanctions, which included an Offer of Settlement for the recommended investment of $300,000 into a variable annuity funded with a mortgage obtained from an LPL Financial-affiliated lender. According to FINRA, the advisor “was aware that the customer was not financially capable of purchasing the recommended variable annuity without encumbering her primary residence to obtain funds to invest.” In 2006, the same advisor received “a referral fee of $1,225” for orchestrating the mortgage loan for the retired widow. In 2004, NASD regulators – through NTM 04-89 – warned brokerage firms against recommending the use of home equity loans to fund investments. The arbitration panel found that LPL Financial failed to supervise the activities of its financial advisor in relation to the funding of the variable annuity transaction.
SEC Charges Broker with Securities Fraud
The Securities Exchange Commission (SEC) charged an LPL Financial registered broker with misappropriation of customer funds in May of 2013. The SEC complaint says that the broker operated a Ponzi scheme that misappropriated “at least $2 million from at least seven investors. The majority of the misappropriated funds constituted retirement savings and/or life insurance proceeds from deceased spouses.” In addition, using LPL Financial letterhead, the broker falsified documents which purportedly represented investments that were never made upon behalf of the investors.
Multi-State Task Force Charges LPL with Failure to Supervise
According to the North American Securities Administrators Association (NASAA) and several state agencies, over the course of 2015 and 2016, LPL failed to supervise its representatives in many areas, including their sale of non-traded REITs. NASAA says that the firm, “through its agents, sold non-traded REITS in excess of the REIT’s prospectus standards, various state concentration limits or LPL’s Alternative Investment Guidelines. The investigation also found that LPL failed to implement a supervisory system that was reasonably designed to achieve compliance with state law.” LPL agreed to a settlement related to non-traded REITs sold by the firm from 2008 to 2013. The firm also consented to an independent review of all transactions during that period. In addition, LPL agreed to pay $1.425 million in civil penalties to be split among 48 states; Washington, D.C.; Puerto Rico; and the U.S. Virgin Islands.
LPL and Representative Charged with Fraud
In December of 2016, the top financial regulator in Massachusetts charged LPL – along with one of their Boston-based investment advisers – with fraudulently selling annuities. According to the complaint, Roger Zullo lied to supervisors, defrauded clients, and fabricated suitability profiles to sell identical high-commission variable annuities in order to enrich himself and his firm. LPL was charged with a failure to supervise. The complaint said that LPL had a “paper-thin compliance review process” and that the firm didn’t act appropriately. Even though the firm may not have known what Zullo was doing, LPL was still responsible for his actions. In a civil complaint, Massachusetts Secretary of State William F. Galvin charged Zullo for accumulating $1.8 million in commissions over a three-year span by mostly selling the same Polaris Platinum annuity to healthcare workers and retirees.
LPL Receives $1.65 Million Fine for Two Major Infractions
LPL was the subject of two actions taken by FINRA in December of 2016. First, the firm was censured and fined $900,000 for failing to send out notices to more than 1.6 million customers informing them of suitability determinations that had been made over the prior three years. And, for failing to maintain over 18.3 million electric communications in non-erasable and non-rewritable format, LPL was censured again and fined an additional $750,000.
LPL-Affiliated Advisor Goes to Prison for Running a Ponzi Scheme
In December of 2016, Charles Caleb Fackrell was sent to prison for over five years for running a Ponzi scheme that garnered $1.4 million. Once out of prison, he also has to serve three years under court supervision. Fackrell operated under the aegis of “Robin Hood, LLC;” “Robinhood LLC;” “Robin Hood Holdings, LLC;” and “Robinhood Holdings, LLC.” The LPL-affiliated advisor was ordered to pay back about $820,000 to 20 victims of his scam.
According to the U.S. Department of Justice: “Court records indicate that Fackrell solicited his victim investors by making false and fraudulent representations, including that the investors’ money would be invested in, or secured by, gold and other precious metals, when in fact Fackrell spent only a fraction of investor money on such assets. According to court records, Fackrell also falsely told victims that Robin Hood was a very safe investment, paying guaranteed annual returns of 5% to 7%. Also according to court records, contrary to the promises he made to his clients and instead of investing the their funds as promised, Fackrell used the majority of the money to cover personal expenditures, including hotel expenses, groceries, and medical bills, to make purchases at various retail shops and to make large cash withdrawals.”
FINRA Fines and Sanctions against Individual Financial Advisors
Jason Charles Parker: permanently barred by FINRA
Michael John Brunelli: suspended by FINRA
Omar Campos: permanently barred by FINRA
Jinesh Pravin Brahmbhatt: suspended by FINRA
Frank Adams III: permanently barred by FINRA
Mark Stark: permanently barred by FINRA
Geno Gates: permanently barred by FINRA
Michael Brunelli: suspended by FINRA
Michael Quinn: permanently barred by FINRA
Julius Kennedy: permanently barred by FINRA
Thomas Caniford: permanently barred by FINRA
Alfred Talens: permanently barred by FINRA
Thomas Hindes: permanently barred by FINRA
Mark Tauzin: suspended by FINRA
Paul Dorion: permanently barred by FINRA
Rafael Moreno: suspended by FINRA
Silver Law Group
Silver Law Group is a nationally recognized securities and investment fraud law firm with Martindale-Hubbell® Peer Review Ratings™ “AV” rated lawyers. We handle all securities arbitration matters on a contingency fee basis. At no cost to investors, we will review account activity and account statements to determine if there was any misconduct, whether there are damages, and the legal causes of action. We investigate all sales practice violations and take into consideration the investor’s age, investment background, and the relationship between the investor and the brokerage firm and financial advisor. Among the causes of action that may be available to investors in claims for damages against brokerage firms and their financial advisors in a securities arbitration claim filed with FINRA are:
For more information, call us at 954-755-4799 or toll-free at 800-975-4345