FINRA Fines LPL Financial, LLC for Failure to Supervise Alternative Investment Sales

Last month, FINRA hit LPL Financial, LLC with a $950,000 fine for failing to supervise its registered representatives’ sale of alternative investments.  FINRA also ordered LPL to conduct a comprehensive review of its “policies, procedures, and training and remedy failures.”

FINRA determined that between 2008 and 2012, LPL representatives often recommended that their customers concentrate savings in alternative investments such as non-traded REITs, and in doing so, ignored state regulations that impose concentration limits on the sale of such investments, as well as concentration limits specified in the offering documents of certain investments.

Many alternative investments carry with them very high commissions.  As these commissions are paid from offering proceeds (and therefore do not appear on the customers’ brokerage statements), they are not readily apparent to the customers.  These high commissions often impair the entity and make it ultimately difficult for many alternative investments to succeed.  Despite these problems, and despite the fact that many alternative investments sold between 2006 and 2009 have failed, many brokerage firms such as LPL are pushing more of these investments on their customers.  2013 in fact saw more alternative investment sales than any prior year.

Blau & Malmfeldt is a law firm headquartered in Chicago, Illinois that represents investors nationwide in securities, commodity futures, and shareholder rights disputes.  Contact us at 312-443-1600 to learn more about the services that we offer.