According to reports, the Financial Industry Regulatory Authority (FINRA) recently fined LPL Financial $950,000 for failure to adequately supervise the sale of alternative investment. These investment products apparently included non-traded RIETs, oil and gas partnerships, business development companies (BDCs), hedge funds, and managed futures.
Alternative investments are typically illiquid high risk products that are not suitable for most investors–even many high-net worth individuals. These types of investments are intended for institutional and sophisticated investors that meet suitability requirements. Unfortunately, many brokers often down play or hide the risk involved in alternative investments and sell the investments as safe, income producing investments
Many alternative investments set concentration limits in their offering documents. In other words investors can only purchase a limited amount of that alternative investment. Certain states have also implemented concentration limits. Furthermore, LPL had established their own concentration guidelines.
According to FINRA, “At first, LPL used a manual process to review whether an investment complied with suitability requirements, relying on information that was at times outdated and inaccurate. The firm later implemented an automated system for review, but that database contained flawed programming and was not updated in a timely manner to accurately reflect suitability standards. LPL also did not adequately train its supervisory staff to analyze state suitability standards as part of their suitability reviews of alternative investments.”
Without admitting or denying the charges, LPL consented to FINRA’s findings that between January 1, 2008, to July 1, 2012 they failed to adequately supervise the sales of alternative investments that violated concentration limits.
The foregoing information, which is publicly available at FINRA.org is being provided by The White Law Group.
Brokerage firms, like LPL Financial, that fail to comply with suitability requirements and sold alternative investments unsuspecting investors, may be liable for investment losses through FINRA dispute resolution.
If you have questions about alternative investments you made with LPL Financial, the securities attorneys of The White Law Group may be able to help. To speak with a securities attorney, please call the firm’s Chicago office at(312)238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at www.WhiteSecuritiesLaw.com.