LPL Financial LLC was recently fined $950,000 for its failure to properly supervise the way its brokers sold alternative investments (such as hedge funds or non-traded real estate investment trusts). FINRA alleged that between January 1, 2008 and July 1, 2012, LPL failed to train their brokers to apply suitability guidelines and used inaccurate and outdated information to review whether an investment complied with such requirements. Further, according to FINRA, LPL exposed its customers to excessive risk by using ineffective manual and automated supervisory processes. It is not surprising that FINRA would seek to fine a firm for sales practices of alternative investments. Often, a FINRA examiner will ask the registered representative two simple questions: (1) explain the alternative investment; and (2) explain the risks associated with the alternative investment. If the registered representative cannot adequately answer these questions, it often leads to a preliminary inference of improper training, improper supervision, and improper sales techniques.
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FINRA Fines LPL Financial LLC $950,000 for Supervisory Failures
