LPL Financial Places Independent Reps Under Supervision

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.

In May, LPL was fined $7.5 million by FINRA for email violations. Earlier this year, the firm agreed to settle an REIT case filed by Massachusetts Secretary of the Commonwealth William F. Galvin by paying $2.2 in restitution and a $500,000 fine. The regulator accused LPL Financial Holdings of not properly reviewing the sale of nontraded real estate investment trusts and violating state rules that cap investors’ buys to 10% of their net worth. The sale of shares from at least seven nontraded REITs between 2006 and 2009 were involved.

The state’s regulator would go on to increase that amount to $4.8 million to be paid back to investors, upping the total penalty to $5.3 million after the sales of the nontraded real estate investment trusts from a broader period-1/1/2005 to 2/13-were taken into account.

LPL Financial Places Independent Reps Under Supervision, Investment News, July 16, 2013

FINRA fines LPL Financial $9 million for email violations, Reuters, May 21, 2013

FINRA

More Blog Posts:
LPL Financial Ordered to Pay $7.5M FINRA Fine Over E-Mail Failures, Institutional Investor Securities Blog, May 22, 2013

LPL Securities Names Ex-SEC Official As Its New General Counsel, Stockbroker Fraud Blog, June 19, 2013

LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients, Stockbroker Fraud Blog, November 29, 2011