LPL Financial Holdings Inc. will pay more than $3.4 million to settle two separate regulatory probes into how the brokerage sold certain complex investment products.
In one instance, the Boston-based firm must pay $2 million to settle allegations by the Massachusetts Attorney General’s Office and the Delaware Justice Department stating LPL failed to supervise its financial advisers who caused clients to hold ETFs for extended periods. Leveraged ETFs are typically designed to deliver a multiple of an index’s performance each day, but results over longer periods can be far different from what the daily objective might suggest.
According to LPL spokesman, “LPL will make enhancements to its oversight of leveraged ETFs including implementation of a renewed training and monitoring program to ensure the proper and effective use of leveraged ETFs as part of investors’ overall financial plans”.
The other instance, is with the North American Securities Administrators Association, which represents state securities regulators, LPL must pay civil penalties of $1.425 million for lapses regarding the firm’s sale of nontraded real-estate investment trusts.
, including the Financial Regulatory Authority and Securities Exchange Commission, for inadequate disclosure of risks and their high fees, which typically range from 12% to 15% at the time of sale.
LPL is the leading securities firm serving so-called independent investment representatives, who typically own their own local business and sell securities as a financial investor of a separate securities firm. In 2014, the firm spent $36.3 million to settle regulatory charges. These regulatory charges have weighed financially on LPL. They continue to resolve remaining compliance issues, resulting from a period of rapid growth.