Linsco/Private Ledger (LPL Financial Services) is headquartered in La Jolla CA. Linsco was established in 1968 and Private Ledger five years later, before 32 year old owner Todd Robinson merged the two in 1989. Through growth and acquisition the firm has become one of the largest retail brokerage firms in the U.S. In 2005, at age 48, Robinson sold 60% of LPL to private interests for $1.5 billion. He also maintained control of Global Portfolio Advisors, a clearing firm for banks and securities dealers.
LPL is a brokerage firm, with independent contractor brokers who are basically self-employed. They receiving the bulk of the commissions generated by their clients but pay virtually all their own expenses. Yet, securities laws and regulations require LPL to supervise these agents. A recent action against a similar firm demonstrated that if its agents also have a supervisor’s license, this does not extinguish the responsibility of firms such as LPL to supervise.
LPL offers fee-only brokerage and markets stocks, bonds, mutual funds, annuities, insurance and other investments, plus trust and financial planning services. It now has a research department and other trimmings of larger financial firms. Its six-story palm tree-lined headquarters is in La Jolla, near neighbors Sun Microsystems and Qualcomm, is in addition to locations in Boston and Charlotte. It claims 4,500 offices (although many are one person offices, some located in agents’ homes) in 50 states and DC.
With $150 billion under management, LPL’s gross revenues are almost $2 billion. It reports in June 2007 that completion of a another in a string of mergers will give it 10,000 registered representatives, which would rank it 8th in the industry by total brokers. Seasoned agents complain that it has grown too big too fast. There is talk of going public or a private sale.
Our law firm represents institutional and individual investors nationwide with significant losses in their portfolios, retirement plans or investment accounts. Our attorneys and staff have more than 100 years of combined experience in the securities industry and in securities law. Several of our lawyers served for years as Vice President or Compliance Officer of brokerage firms.
Each lawyer and staff member of our firm is devoted to assisting investors to recover losses caused by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent. We have handled over a thousand cases against hundreds of large and small investment firms, including claims against Linsco/Private Ledger.
Call us at (800)259-9010 or contact us through our website to arrange a free confidential consultation with an attorney to discuss your experiences with an investment advisor or financial firm which resulted in losses.
The National Association of Securities Dealers, Inc. (NASD) announced sanctions and fined Linsco/Private Ledger $2.4 million Raymond James for causing its clients to pay higher than necessary commissions on mutual funds.
Many mutual funds charge sales commissions, which are paid to firms which sell the mutual funds. Front-end load funds, called “A-shares”, charge the loads when the funds are purchased. These funds almost always offer volume discounts when higher amounts are invested into a fund. Such volume discounts come at various levels of investment (examples: $10,000 or $100,000) which are called “breakpoints.”
Furthermore, mutual fund managers extend the breakpoints to include purchases made into a “family of funds”, so that diversification can be accomplished without missing available breakpoints. As well, funds managers allow time to meet breakpoints, usually a year, and even offer “letters of intent” so investors can get the discounts during that year.
Because breakpoints lower the commissions earned by salespersons, there is room for abuse, and regulators consider it a violation for registered persons to seek to avoid such discounts. The SEC and NASD each brought cases against a group of firms which allegedly were allowing their representatives to violate the “break-point” rules.
The NASD fined Linsco/Private Ledger $3.6 million directed brokerage transactions of its clients, in exchange for preferential treatment from a number of mutual fund companies.
Brokerage firms are required to seek “best execution” for their clients when making trades and bartering such orders not only violates this rule but also creates an improper “self-dealing” situation. The company neither admitted nor denied the charges.
“When recommending mutual fund investments, firms must act on the basis of merits of the funds and the investment objectives of the customers and not because of other benefits the brokerage firm will receive,” said a NASD official, our “prohibition on the receipt of directed brokerage is designed to eliminate these conflicts of interest.”
LPL was also sued for allegedly not adequately disclosing payments received to promote favored annuity products. Such disclosures are required. The company had no comment on the case.
The NASD censured and fined Linsco/Private Ledger for failing to make required disclosures about its registered representatives in a timely manner. Such disclosures are due in 30 days but, according to the NASD’s sanction order, over half of LPL’s reports were late.
The investigation was commenced as a result of complaints by securities attorneys, including the law firm of Shepherd Smith Edwards & Kantas LTD LLP, and others, that securities firms were ignoring requirements to notify regulators of customer complaints, regulatory actions and even criminal charges and conviction in a timely fashion. Some disclosures were made years after the events, often only after broker left the firm and some were never filed.
The industry wide investigation resulted in censures and fines totaling $9.2 million against 29 firms, including LPL. The NASD states that over 8,000 disclosures of reportable information about brokers at these firms were late.
Regulators must rely upon firms to make timely disclosure because oversight of more than 665,000 registered brokers at nearly 5,300 registered firms is otherwise extremely difficult. Securities firms chose decades ago to be “self-regulated”. “Investors, regulators and others rely heavily on the integrity of the information in the CRD public reporting system … and the integrity of that system depends on accurate and prompt reporting by firms,” said an NASD official.
The New York City Retirement Systems and TIAA-CREF have joined other institutional investors in suing American Realty Capital Properties (ARCP). They contend that the real estate investment trust violated federal securities laws when it allegedly made misleading and false statements that misrepresented the company’s business, as well as took part in a scam to fool the market and artificially inflate American Realty securities prices.
The claims are related to a $23 million accounting error that REIT made during last year’s first stated quarters, misstating the company’s adjusted operation funds. While ARCP eventually disclosed the mistakes, the plaintiffs claim that the company’s senior executives did not at first correct the error when it was discovered. The institutional investors believe that this was because executives wanted to get class members to buy American Realty securities at inflated prices.
TIAA-CREF and the $158.7 billion pension fund are seeking lead plaintiff class action securities status for their institutional investor fraud lawsuit.
Also suing ARCP with their securities fraud case are lead plaintiffs Ohio State Teachers' Retirement System and Ohio State Teachers' Retirement System. They claim that they lost $7.5 million because of the same alleged fraud.
Credit rating agency Standard & Poor’s recently said its ratings of ARCP—a BB+ issue level rating and a BB corporate credit rating—are still on CreditWatch and that there are negative implications. Board investigations and an external auditor review of the REITs financial statements are pending.
In December, Moody’s Investors Service (MCO) gave ARCP a Ba1 junk status, again in the wake of the accounting debacle and the forced executive turnover. That a number of financial firms including LPL Financial (LPLA), Charles Schwab (SCHW), Fidelity, AIG Advisor Group, Securities America, National Planning Group, and even ARCP founder and chairman Nicholas Schorsch’s Cetera Financial Group suspended trading in nontraded real estate investment trusts affiliated with Schorsch did not help.
The accounting error was a huge blow to ARCP, forcing many of its top executives, including Schorsch to step down. Also gone are ARCP CEO David Kay and COO Lisa Beeson.
Contact our REIT fraud lawyers today.
American Realty Capital Properties hit by lawsuit from institutional investors, Investment News, January 26, 2015
S&P Affirms American Realty Capital Properties (ARCP) Ratings Following Recent Bondholder Actions, Street Insider, January 22, 2015
More Blog Posts:
Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014
National Planning Holding Temporarily Stops Selling American Reality Capital Properties’ Nontraded REIT sales After Disclosure of $23M Accounting Error, Institutional Investor Securities Blog, October 31, 2014
Net Asset Value of Tony Thompson's Former Nontraded REIT Strategic Realty Trust Plunges, Stockbroker Fraud Blog, July 22, 2014
Ex-LPL Financial Supervisor Settles with FINRA
Peter Neuberg, a former LPL Financial (LPLA) supervisor and broker, will pay a $15K fine and serve a six-month suspension to settle claims accusing him of not reasonably supervising a registered representative. According to an enforcement document signed by the Financial Industry Regulatory Authority, Neuberg stopped looking at paperwork that the representative prepared. This made it possible for the broker to modify documents about customer accounts and reuse signatures from forms that had been completed. Neuberg is settling without admitting or denying FINRA’s findings.
The purported supervisory failures would have taken place from September ’11 to June ’12. The broker, whom Neuberg supervised, falsified documents to expedite transactions to accommodate certain customers. Neuberg is accused of not properly training the broker.
Ex-GL Capital Partners CEO Gets Nine Years in Prison
In other news, Daniel Thibeault, the former CEO of GL Capital Partners, is sentenced to nine years behind bars for misappropriating at least $15M. He must pay $15.3M in restitution for the criminal charges. He also is contending with civil charges brought by the Securities and Exchange Commission.
Thibeault pleaded guilty to wire fraud, securities fraud, obstruction of justice, and aggravated identity theft. He and the firm were investment advisers to the GL Beyond Income Fund (GLBFX), which is where they misappropriated the money.
Investors thought their money was going toward purchasing or making consumer loans on which they would make money off the interest. Instead, fake loans were reported as fund assets.
Our stockbroker fraud law firm has helped thousands of investors recoup their losses. We represent investors in arbitration and litigation. If you want to increase your chances of financial recovery, you should work with an experienced securities lawyer. You want someone advocating on your behalf and fighting for your right to get back your lost funds. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.
Former LPL broker suspended for supervisory failure, Finra says, InvestmentNews, June 21, 2016
Ex-Fund CEO Gets 9 Years For Fraud, Obstruction Of SEC, Law360, June 20, 2016
Read the SEC Complaint (PDF)