Secretary of the Commonwealth of Massachusetts William Galvin has imposed a $1.1M fine on target=”_blank” rel=”noopener noreferrer”>LPL Financial (LPLA) after finding that the brokerage firm did not properly register 651 of its advisors in the state. Galvin’s office contends that for six years, LPL let these brokers work in Massachusetts despite the lack of registration and that this violates the state’s securities laws.
In Massachusetts, a brokerage firm is required to register its agents before they are allowed to engage in securities-related business in the state. As of May 9, LPL had 4,219 agents who were registered in the state.
However, the lack of registration by 651 of its agents between March 2013 and April 4, 2019 prevented Massachusetts securities regulators from being able to check their qualifications and histories to ensure that investors who worked with them were in safe hands. 441 of these unregistered agents acted as financial advisors to at least one or more state residents during the period at issue. The other 210 agents supervised the agents who were advisors to these customers.
Galvin’s office called this lapse a failure by LPL to fulfill its duty to supervise its advisers by making sure that all of them were properly registered. Also, the state’s securities division had reportedly notified the brokerage firm at least 67 times that supervisors who were also agents needed to be registered.
While unregistered, the LPL brokers engaged in the following in Massachusetts:
- Provided securities advice
- Solicited securities transactions
- Supervised agents
- Engaged in securities transactions
Galvin’s office is also accusing LPL Financial of not reporting in a timely manner almost 800 reportable events, including multiple regulatory actions, over 100 customer complaints, 12 criminal complaints, and other matters.
LPL has agreed to pay the fine and will review its procedures and policies.
target=”_blank” rel=”noopener noreferrer”>LPL Financial is the largest independent brokerage firm in the US. Although its main headquarters is in Massachusetts, it isn’t just in this state that the firm and its representatives, both registered and unregistered, have gotten into trouble with federal or state regulators.
For example, last month, the Financial Industry Regulatory Authority (FINRA) barred Philip John Nalesnik, a former LPL broker based in Pennsylvania. Nalesnik was the subject of numerous customer complaints before LPL finally fired him.
Late last year, another former LPL broker, Sonya Camarco, was sentenced to 20 years behind bars for stealing $1.1M from clients. Camarco was based in Colorado.
On a broader scale, in 2018, LPL agreed to pay state regulators a collective $26M in fines over unregistered securities transactions going back more than 10 years.
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