Attorney General James Announces Multistate Settlement With LPL Financial After Firm Violated Laws

LPL to Offer Relief to Investors and Pay More Than $25 million in Penalties 

  New York Attorney General Letitia James announced a multistate settlement with LPL Financial LLC (LPL) that mandates the firm offer to repurchase specific securities from investors after the firm sold unregistered securities to clients across the nation.  

“When New Yorkers invest with financial firms, they trust those firms to obey the law and act with integrity,” said Attorney General Letitia James. “LPL failed to meet these standards and was not transparent while making purchases on behalf of its clients. New Yorkers wronged by this firm’s conduct can rest assured that new protections are being put in place to safeguard against issues like this from taking place at LPL again.” 

The settlement — resulting from a yearlong, multistate task force investigation, coordinated by the North American Securities Administrators Association (NASAA) and led by Massachusetts and Alabama — arises from LPL’s violation of Blue Sky laws. The firm failed to develop and maintain systems and procedures to prevent the sale of unregistered, non-exempt securities to certain customers between October 1, 2006 and May 1, 2018. Specifically, the investigation focused on LPL’s failure to retain and use, and then subsequently cancel, certain third-party services central to LPL’s compliance with state securities registration requirements. State securities regulators also found deficiencies within LPL’s compliance structure, including LPL’s failure to supervise and to maintain adequate books and records, which contributed to the firm’s offer and sale of unregistered, non-exempt securities.  

As part of the agreement made with the New York Attorney General’s Office, LPL will offer to repurchase certain securities still held in the accounts of eligible investors, or if eligible investors have already sold or transferred their securities, LPL will make a damages offer to investors. LPL will make repurchase offers to eligible consumers by or before November 2019.  

In addition to the relief offered to eligible New York investors, LPL will pay a $499,000 civil penalty to the New York Attorney General’s Office, and up to a total of $25,948,000 to all jurisdictions that had the option to be involved in the multistate settlement, which included nearly every state, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. 

LPL has also agreed to a comprehensive internal review of all operations and procedures to enhance its processes and supervisory systems to prevent future sales of unregistered securities. Further, LPL will review its vendor service protocols to ensure compliance with state securities laws.