FINRA found that from
LPL at first used a manual process to review whether an investment complied with prospectus, state and LPL’s own alternative investment concentration guidelines, relying on information that FINRA said was outdated and inaccurate. The firm later implemented an automated system, but that database contained flawed programming and was not updated in a timely manner to accurately reflect suitability standards, according to FINRA.
LPL also did not adequately train its supervisory staff to analyze state suitability standards as part of their suitability reviews of alternative investments.
FINRA cited the alternative investment recommendations of
“LPL exposed customers to unacceptable risks by not having an adequate system in place that could accurately review whether a transaction complied with suitability requirements imposed by the states, the product issuers and the firm itself – and it failed to train its registered representatives to apply all the suitability guidelines appropriately,”
LPL neither admitted nor denied the charges, but consented to an entry of FINRA’s finding. “LPL is pleased to have resolved this matter following an investigation in which we cooperated fully with FINRA staff. When the firm became aware of misconduct by the referenced financial advisor in his non-traded real estate investment trust (REIT) transactions, the firm promptly terminated the advisor. He has been barred from the industry,”
Shorris noted that beginning in 2012, LPL began a rigorous review of its supervisory policies and procedures regarding the processing and sale of alternative investments, including non-traded REITs. “We believe that the enhancements we have since made significantly strengthen our ability to review the suitability of these transactions and ensure that sales of these products in the future comply with all applicable requirements,” he said.
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