LPL Financial

AIG Advisor Group, Securities America, LPL Financial, Cambridge, And Even Schorsch’s Broker-Dealer Stops Selling His REITs

Published on: November 7, 2014 | by Shepherd Smith Edwards & Kantas, LLP

More broker-dealers are suspending their sale of Nicholas Schorsch-affiliated nontraded real estate investment trusts. The suspensions are coming in the wake of the announcement of a $23 million accounting error involving American Reality Capital Properties Inc., which is the traded REIT under Schorsch’s control. Even after the error was found it was purportedly purposely left unfixed.

Now, LPL Financial Holdings Inc. (LPLA), the biggest independent broker-dealer in the country, has said that it has put a stop for now to the sale of products sponsored Schorsch’s RCS Capital Corporations, American Realty Capital Properties Inc., and their affiliates. LPL has almost 14,000 advisers.

Another brokerage network, AIG Advisor Group, which has four broker dealers and 6,000 registered representatives and advisers, said it was suspending its sale of two Schorsch-related nontraded REITS: the Phillips Edison-ARC Grocery Center REIT II and the American Realty Capital New York City REIT Inc.

Ex-LPL Financial Adviser, James Bashaw from Texas, Lands at New Brokerage Firm

Published on: October 30, 2014 | by Shepherd Smith Edwards & Kantas, LLP

James “Jeb” Bashaw, the former star financial adviser at LPL Financial (LPLA) from Texas is now registered with International Assets Advisory, a small brokerage firm. LPL Financial fired Bashaw last month over allegations involving selling away. Then, for a while this month, he was with Wunderlich Securities Inc.

Selling away typically involves engaging in private securities transactions sans the required written disclosure or brokerage firm approval. It can also include borrowing from a client, as well as engaging in a transaction that is a potential conflict interest, again without the required disclosure in writing or firm approval.

Responding to the selling away allegations, Bashaw noted that he was “home supervised” and underwent more than a dozen perfect audits while affiliated with LPL. After his firing, Wunderlich took steps to hire Bashaw but there was a delay in transferring his license to the firm. In the end, the broker-dealer and Bashaw reportedly decided not to pursue a working relationship.

Former LPL Financial Broker Must Pay Almost $2 Million For Bilking Clients, Including Elderly Investors

Published on: August 29, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Blake B. Richards, an ex-LPL Financial (LPLA) broker, must pay close to $2 million in penalties and disgorgement over allegations that he defrauded clients of close to $1.7 million. According to the case, submitted in the U.S. District Court of the Northern District of Georgia, Richards told at least seven clients to write checks to entities under his control. The clients thought that the money would be invested in variable annuities, fixed-income investments, or equities. Instead, contends the U.S. Securities and Exchange Commission, the funds were used to pay for his personal spending.

According to the SEC, most of the investors’ money came from life insurance proceeds or retirement savings. Two of the investors involved were widowed and at least two others were elderly customers.

Per the regulator’s complaint, Richards won one investor’s trust by delivering pain meds to her husband during a snowstorm. The spouse was suffering from terminal pancreatic cancer at the time.

LPL Financial to Pay Illinois $2 Million Fine Related to Variable Annuity Exchanges

Published on: August 13, 2014 | by Shepherd Smith Edwards & Kantas, LLP

In a settlement reached with the Illinois Securities Department, LPL Financial (LPLA) agreed to pay a $2 million fine and $820K in restitution for inadequate books and records maintenance involving 1035 exchanges. According to the firm’s BrokerCheck file, LPL Financial did not enforce “supervisory system and procedures” when certain persons documented variable annuity exchange activities.

Following the settlement, a company spokesperson said that LPL Financial is enhancing its procedures related to surrender charges resulting from variable annuity exchange transactions. This is to make sure these are accurately documented in records, books, and any disclosures that are issued to clients. The brokerage firm is also taking steps so that advisers are properly documenting why variable annuity recommendations were made.

State regulators have been taking a closer look at LPL as they investigate investment product sales. Last year, the broker-dealer settled with the Massachusetts for at least $2 million and a $500,000 fine over nontraded real estate investment trusts. Financial Industry Regulatory Authority fined the firm $7.5 million for 35 e-mail system failures.

LPL Financial Fined $950K by FINRA for Supervisory Failures Involving Alternative Investments

Published on: March 25, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA says that LPL Financial, LLC must pay a fine of $950,000 for supervisory deficiencies involving the sale of alternative investment products, such as oil and gas partnerships, non-traded real estate investment trusts, managed futures, hedge funds, and other illiquid pass-through investments. By settling, the independent broker-dealer is not denying or admitting to the FINRA charges. LPL however, has agreed to an entry of the self-regulatory agency’s findings.

A lot of alternative investments establish concentration limits and certain states have even stipulated their own concentration limits for alternative investment investors. LPL also has set its own limits.

According to FINRA, however, from 1/1/08 to 7/1/12 LPL did not properly supervise the sale of alternative investments that violated of concentration limits. The SRO contends that even though initially LPL employed a manual system to assess if an investment was in compliance with requirements for suitability, the brokerage firm sometimes relied on inaccurate and dated data. Later, when LPL put into place a system that was automated to conduct the reviews, the system was purportedly not updated to make sure current suitability standards were correctly reflected and the programming in the database was flawed.

FINRA Bars Ex-LPL Broker Over Nontraded REIT Sales

Published on: December 27, 2013 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred ex-LPL Financial (LPLA) representative Gary Chakman over securities industry rule violations related to the sale of non-traded real estate investment trusts. Chackman was registered with the brokerage firm from 2001 until 2012. LPL then ended his registration with the firm for purportedly violating its procedures and policies related to alternative investment sales.

According to the SRO, Chackman “recommended and effected” transactions that were unsuitable in several LPL customer accounts. He did this by overconcentrating clients’ assets in illiquid securities, including REITs. Chackman is also accused of falsifying LPL documents to avoid firm supervision and making the broker-dealer’s records and books inaccurate because he turned in purchase forms misrepresenting clients’ liquid net worth.

FINRA’s settlement letter says that when Chackman submitted falsified documents, this allowed him to increase how much of customers’ accounts could be concentrated in REITs and other investments even though these amounts went over LPL’s allowed allocation limits. The alleged overconcentration took place between January 2009 and February 2012.

Securities America & Ameriprise Among Independent Broker-Dealers Charged $10.75M by Massachusetts for Non-traded REIT Sales

Published on: September 4, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts Secretary of the Commonwealth William Galvin just announced that independent broker-dealers Ameriprise Financial Services (AMP), Securities America Inc., Commonwealth Financial Network, Lincoln Financial Advisors, and Royal Alliance Associates have consented to pay another $10.75 million in restitution over non-traded REITs that were sold to clients between 2005 and now. The added charge comes four months after the five independent brokerage firms consented to pay $6.1 million in restitution and $975,000 in fines. It was investors’ complaints that spurred the regulator’s investigation into the REITs.

Along with LPL Financial (LPLA) consenting to pay $4.8 million in restitution to clients for its sale of non-traded REITs, that’s a total of $21.6 million in restitution and fines of nearly $1.5 million from the six IBDs. In a statement, Galvin acknowledged the popularity of these risky investments. The regulator noted that the state’s probe discovered problems pertaining to firms adhering to their own policies and that this was a widespread matter. He also said that there appeared to be issues related to brokerage firms abiding by the state rule that investors cannot buy REITs that are over 10% of an individual’s liquid net worth.

Our REIT lawyers represent investors that have sustained huge losses because of the negligence of brokerage firms, investment advisors, and their representatives. Contact our securities fraud law firm today. We work with clients throughout the US, as well as investors based abroad with claims against firms based in the country.

LPL Financial Places Independent Reps Under Supervision

Published on: August 20, 2013 | by Shepherd Smith Edwards & Kantas, LLP

LPL Financial Inc. (LPLA) is no longer allowing independent representatives to supervise themselves and will impose a fee increase on some 2,200 one-person shops. These changes are among the firm’s steps to restructure oversight and compliance. With over 13,000 registered investment advisers and financial representatives, LPL is the biggest independent-contractor brokerage firm.

The reps that opt to have LPL Financial home office supervise them will pay a fee hike of $4,800 in 2015. Reps with one-adviser shops can also choose to have an existing office of supervisory jurisdiction (OSJ) that is qualified to supervise them, which cost them another 5% on production. They would pay 4% – 30% of gross fees and commissions. Those that pay the most would get more service.

These changes come right before the Financial Industry Regulatory Authority will enact its consolidated supervision rule 3110 that will mandate that firms provide an on-site supervisory structure for single-person OSJs that would employ designated senior principals. Generally, industry regulators have been wary of these solo OSJs because of insufficient oversight over the investment product recommendations that representatives make to clients. LPL spokesperson Betsy Weinberger says these modifications are the latest in the broker-dealer’s efforts to enact better compliance oversight and ensure company success and growth.

LPL Securities Names Ex-SEC Official As Its New General Counsel

Published on: June 19, 2013 | by Shepherd Smith Edwards & Kantas, LLP

LPL Securities has hired the Securities and Exchange Commission Division of Enforcement’s ex-acting deputy director David Bergers as LPL Financial Holdings Inc.’s (LPLA) general counsel and managing director for government and legal relations. Following news of the appointment, LPL CEO and Chairman Mark Casady was quick to point out that the firm didn’t choose Bergers because it recently has been in trouble with regulators. That said, Casady did acknowledge that Bergers’ 13 years of SEC experience was one reason he became the top contender for the post. Because of SEC rules, Bergers is not allowed to appear before the Commission as an LPL representative until June 2014.

A source close to our securities fraud law firm says that there are at least seven complaints against Bergers at the moment, with the majority of them involving large seven-figure. Before working at the SEC, Bergers served as assistant general counsel and vice president for Tucker Anthony Inc., a regional brokerage firm.

In regards to LPL’s recent trouble’s with regulators, there was the $7.5 million that the Financial Industry Regulatory Authority ordered the financial firm to pay over nearly three dozen key e-mail system failures (including retention issues) that occurred between 2007 and 2013 involving 28 million business emails and thousands of independent contractor representatives. The SRO accused LPL of inadequate supervision, failure to capture emails and respond to regulator requests, and making misstatements during the SRO’s investigation. In addition to the fine, LPL has to establish a $1.5 million fund for customer compensation.

SEC Charges Ex-LPL Financial Adviser With Defrauding Investors of $2M

Published on: May 28, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Blake Richards, a former LPL Financial LLC adviser, is now facing Securities and Exchange Commission charges for allegedly defrauding investors and misappropriating about $2 million from at least seven customers. Most of the funds that were misappropriated were life insurance proceeds from dead spouses and retirement funds. Last week, the regulator filed an emergency action asking a judge for a temporary restraining order, which was granted. Now, Richard’s assets have been frozen.

Per the SEC, Richards told investors to write checks to BMO Investments and Blake Richards Investments, which he controlled. They expected that he would put their money in variable annuities, fixed income assets, and common stock. Instead, contends the agency, none of these investments were ever executed and Richards allegedly took the money and used it for his personal spending.

The Commission is accusing Richards of violating the antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The SEC is also alleging Investment Advisers Act of 1940 and the Advisers Act violations.