LPL Financial reaches $499,000 settlement with New Jersey authorities over sale of unregistered securities

Maria Nikolova

The settlement follows an investigation regarding the failure by LPL to establish reasonable policies to prevent the sale of unregistered, non-exempt securities to its customers between October 1, 2006 and May 1, 2018.

Attorney General Gurbir S. Grewal and the New Jersey Bureau of Securities within the Division of Consumer Affairs announced today that the brokerage firm LPL Financial agreed to pay the Bureau a $499,000 penalty to resolve violations that LPL offered and sold unregistered securities, and failed to have in place adequate policies and procedures to prevent those sales.

Under the settlement, LPL has also agreed to offer repurchases on unregistered securities it sold in New Jersey during that time.

The North American Securities Administrators Association (NASAA), of which the Bureau is a member, established a task force to investigate LPL’s failure to establish and maintain reasonable policies and procedures to prevent the sale of unregistered, non-exempt securities by LPL to its customers. Whereas the investigation has not found any evidence of willful, reckless or fraudulent conduct by LPL, the NASAA task force found that LPL failed to maintain adequate systems to reasonably supervise agents, staff and employees to prevent the sale of unregistered, non-exempt securities.

State investigators also determined that LPL failed to maintain books and records necessary to ensure full and proper compliance with state securities registration requirements.

Furthermore, investigators found that LPL failed to conduct necessary due diligence regarding the retention, use and subsequent cancelation of certain third-party services critical for compliance with state securities registration requirements.

Under terms of the settlement, LPL has agreed to enhance its processes and supervisory systems to prevent future sales of unregistered securities. The firm will also extend repurchase offers on any solicited orders of equity or fixed income securities sales in New Jersey between October 1, 2006 and May 1, 2018 that are determined to have been unregistered and non-exempt.

Under the settlement, repurchase offers will be made at the original purchase price plus three percent interest per year. LPL is expected to make repurchase offers to eligible consumers by or before November 2019.

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