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LPL Hit With Supervisory Failure Sanctions

October 31, 2017

LPL Financial is facing over about a million dollars in fines ordered by regulators in New Jersey and North Carolina, InvestmentNews writes.

The New Jersey Bureau of Securities has fined the company $950,000 over supervisory failures in the sales of illiquid alternative investments, according to the publication. The firm must also pay $25,000 into an investor education fund as part of the settlement, InvestmentNews writes.

LPL over-concentrated its clients in real estate investment trusts and non-traded business development companies, according to the settlement cited by the publication. In one case, close to 20% of a client’s assets were invested in REITs while such investments shouldn’t exceed 10% of a client’s liquid net worth, according to InvestmentNews. In another case, another LPL client had about 13% of their assets invested in BDCs, while such investments are capped at 10% for New Jersey clients, the publication writes. At the same time, LPL made up to 10% in commissions from the sales of alternative investments by brokers affiliated with the firm, according to the settlement cited by InvestmentNews.

The state regulator, which looked at more than 5,200 non-traded REIT sales and 2,100 illiquid BDCs at LPL, says the firm failed to follow its own supervisory policies on the sales of such investments and to keep adequate records, according to the publication.

The state of North Carolina, meanwhile, has fined LPL over a $1.4 million Ponzi scheme, InvestmentNews writes. The company must pay a $25,000 fine but also cover the $270,000 the state spent on its investigation, according to the publication.

The case involves former LPL-affiliated broker Charles Fackrell, who from May 2012 to December 2014 ran a Ponzi scheme by steering at least 20 clients into various bogus investments he controlled and that gave him access to the clients’ money, according to a statement from the U.S. Attorney’s office cited by InvestmentNews.

Fackrell pleaded guilty to securities fraud last April and got a 63-month jail sentence in December, InvestmentNews writes. Under the plea, he must also reimburse his clients $820,000 and serve three years under court supervision after his release, according to the publication.

Separately, Finra has barred former LPL broker Jerry Lee Travers for failing to show up for testimony, InvestmentNews writes. Travers was to appear at the hearing to explain payments he had made to a non-registered person in connection to securities trades, according to the letter of acceptance and consent cited by the publication.

(Getty)

Travers, who had been in the securities industry since 1983, separated from LPL last December after about four years with the firm and hasn’t registered with another company since then, InvestmentNews writes.

By Alex Padalka
  • To read the InvestmentNews article cited in this story, click here.
  • To read the InvestmentNews article cited in this story, click here.