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LPL Financial Holdings Inc.

Shepherd Smith Edwards & Kantas has decades of experience representing investors against financial advisors employed by LPL Financial Holdings Inc. The entity, generally referred to as LPL, is deemed by many to be one of the largest independent broker-dealers in the US. An independent broker-dealer is different than the big-name brokerage houses. They were created to appeal to financial advisors who want greater autonomy, but need back-office support. Often, they will operate out of strip malls or small office parks. Generally, there is no onsite management.

LPL stands for Linsco Private Ledger. The company started in 1989 when two brokerage firms, Linsco (formed in 1968) and Private Ledger (formed in 1973) merged. The company has expanded since the merger through natural growth acquisitions. These are generally one-person offices. Sometime the main financial advisor will have a junior broker or two working for them. The company claims to have more than 16,000 financial advisors in its employment, and approximately $681 billion in assets under management. LPL generated approximately $5.2 billion in revenue for the 2018 fiscal year.

According to its website, LPL Financial has main offices in Boston, Fort Mill, South Carolina, and San Diego. However, according to FINRA, its main office is in South Carolina. LPL also has subsidiaries which include LPL Financial LLC, LPL Insurance Associates, Inc., Fortigent, LLC, and The Private Trust Company, N.A.

According to FINRA's website, LPL has 176 Regulatory events filed against it. A Regulatory event is when a regulatory agency such as FINRA, the SEC, or a State Securities Board investigates a brokerage firm for violations of federal/state laws, and industry rules or standards. For example, there was a multistate task force, coordinated by the North American Securities Administrators Association inc. (NASAA), that conducted an investigation of LPL regarding unregistered, non-exempt securities. The accusation against LPL was that between October 1, 2006 and May 1, 2018, it failed to maintain adequate systems to prevent the sale of unregistered, non-exempt securities and also failed to reasonably supervise its agents in that regard. LPL was further accused of other deficiencies associated with its controls, monitoring and reporting tools, and also its escalation protocols. Lastly, LPL failed to maintain its books and records properly to ensure full compliance with state securities registration procedures. In short, the state regulatory agencies involved concluded that LPL had poor supervisory practices. The states involved include: Georgia, Oregon, Texas, New Jersey, New York, Ohio, Virginia Tennessee, Minnesota, North Carolina, and South Carolina to name a few.

Other Regulatory matters include the Securities and Exchange Commission's pursuit of LPL over mutual fund share class selection. Meaning, the SEC believed LPL did not supervise its agents over directing of clients to the proper share selection such as Class A, B or potentially C. A shares charge upfront but are discounted if there are sufficient assets. B shares charge on the back end and are best suited for smaller investors. The SEC stated it was in the public interest that cease-and-desist proceedings be instituted against LPL. It was concluded that breaches of fiduciary duty and inadequate disclosures by LPL occurred in connection with its protocols surrounding class selection practices for mutual funds. As a result, there were issues with the amount of fees LPL received and customers unnecessarily paid. The SEC went on to say LPL neglected to state on its Form ADV, an official federal document, that there were conflicts of interest related to mutual fund share class fees. As part of a deal, LPL was ordered to cease and desist its improper actions. It was also censured and had to pay a fine in the form of disgorgement of $8,115,290.79 and also prejudgment interest of$1,218,225.48.

If you lost money working with a LPL advisor please contact the law firm of Shepherd Smith Edwards & Kantas. We have experience working with clients who have improperly suffered losses through LPL advisors. As mentioned, these advisors are generally unsupervised on-premise and often take advantage of unwitting clientele. In recent years many LPL advisors have been marketing and concentrating clients in privately traded investments such as REITs.

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