Growth of LPL Financial Creating Problems with Regulators

According to a recent article in the New York Times, LPL Financial, has 13,300 brokers, 6,500 offices, 4.3 million customers — and a growing list of problems with regulators.

LPL is now the nation’s fourth-largest brokerage firm — after Wells Fargo, Morgan Stanley and Merrill Lynch — and the largest in much of rural America--its specialty. LPL’s explosive growth has brought the difficulties regulators face in overseeing far-flung financial advisers.

LPL has been censured by state and federal authorities with unusual frequency. LPL brokers have been penalized for selling complex investments to unsophisticated investors, for speculative trading in customer accounts, and, in a few cases, for outright stealing from clients.

State regulators in Illinois, Massachusetts, Montana, Oregon and Pennsylvania have penalized LPL for failing to oversee its brokers properly.

Many investors have turned to independent brokerage firms like LPL. LPL brokers are essentially contractors. They get LPL e-mail addresses and come under LPL compliance but pay for office space and staff. With overhead costs relatively low, the company can pass a large percentage of commissions and fees — upward of 80 percent — back to its brokers.

But analysts say that the high commissions leave LPL less money for compliance and can attract brokers interested in skirting the rules.

Massachusetts secretary of the commonwealth, William F. Galvin, came to a $2.5 million settlement with LPL in February. Mr. Galvin said LPL had failed to properly examine who the products were being sold to, and had pushed the investments without mentioning that they provided big commissions to LPL and its brokers. In Washington State last year, authorities brought a case against a LPL broker who had sold nontraded REITs to dozens of older clients.

In the latest quarter LPL executives said they had added 182 brokers and increased revenue 14 percent from a year earlier.

If you or a family member have experienced losses through LPL Financial, call a Securities Arbitration Lawyer for a free consultation on how to potentially recover your losses at 888-760-6552.