Linsco/Private Ledger Background Information
LPL is a brokerage firm, with independent contractor brokers who are basically self-employed. They receiving the bulk of the commissions generated by their clients but pay virtually all their own expenses. Yet, securities laws and regulations require LPL to supervise these agents. A recent action against a similar firm demonstrated that if its agents also have a supervisor’s license, this does not extinguish the responsibility of firms such as LPL to supervise.
LPL offers fee-only brokerage and markets stocks, bonds, mutual funds, annuities, insurance and other investments, plus trust and financial planning services. It now has a research department and other trimmings of larger financial firms. Its six-story palm tree-lined headquarters is in La Jolla, near neighbors Sun Microsystems and Qualcomm, is in addition to locations in
With $150 billion under management, LPL’s gross revenues are almost $2 billion. It reports in June 2007 that completion of a another in a string of mergers will give it 10,000 registered representatives, which would rank it 8th in the industry by total brokers. Seasoned agents complain that it has grown too big too fast. There is talk of going public or a private sale.
Shepherd Smith Edwards & Kantas LTD LLP Law Firm
Our law firm represents institutional and individual investors nationwide with significant losses in their portfolios, retirement plans or investment accounts. Our attorneys and staff have more than 100 years of combined experience in the securities industry and in securities law. Several of our lawyers served for years as Vice President or Compliance Officer of brokerage firms.
Each lawyer and staff member of our firm is devoted to assisting investors to recover losses caused by unsuitability, over-concentration, fraud, misrepresentation, self-dealing, unauthorized trades or other wrongful acts, whether intentional or negligent. We have handled over a thousand cases against hundreds of large and small investment firms, including claims against Linsco/Private Ledger.
Call us at (800)259-9010 or contact us through our Website to arrange a free confidential consultation with an attorney to discuss your experiences with an investment advisor or financial firm which resulted in losses.
Linsco/Private Ledger Overcharged For Funds
The National Association of Securities Dealers, Inc. (NASD) announced sanctions and fined Linsco/Private Ledger $2.4 million Raymond James for causing its clients to pay higher than necessary commissions on mutual funds.
Many mutual funds charge sales commissions, which are paid to firms which sell the mutual funds. Front-end load funds, called “A-shares”, charge the loads when the funds are purchased. These funds almost always offer volume discounts when higher amounts are invested into a fund. Such volume discounts come at various levels of investment (examples: $10,000 or $100,000) which are called “breakpoints.”
Furthermore, mutual fund managers extend the breakpoints to include purchases made into a “family of funds”, so that diversification can be accomplished without missing available breakpoints. As well, funds managers allow time to meet breakpoints, usually a year, and even offer “letters of intent” so investors can get the discounts during that year.
Because breakpoints lower the commissions earned by salespersons, there is room for abuse, and regulators consider it a violation for registered persons to seek to avoid such discounts. The SEC and NASD each brought cases against a group of firms which allegedly were allowing their representatives to violate the “break-point” rules.
LPL Bartered Client Trades for Fund Favors
The NASD fined Linsco/Private Ledger $3.6 million directed brokerage transactions of its clients, in exchange for preferential treatment from a number of mutual fund companies.
Brokerage firms are required to seek “best execution” for their clients when making trades and bartering such orders not only violates this rule but also creates an improper “self-dealing” situation. The company neither admitted nor denied the charges.
"When recommending mutual fund investments, firms must act on the basis of merits of the funds and the investment objectives of the customers and not because of other benefits the brokerage firm will receive," said a NASD official, our "prohibition on the receipt of directed brokerage is designed to eliminate these conflicts of interest."
LPL was also sued for allegedly not adequately disclosing payments received to promote favored annuity products. Such disclosures are required. The company had no comment on the case.
LPL Fined Over Broker Disclosure Violations
The NASD censured and fined Linsco/Private Ledger for failing to make required disclosures about its registered representatives in a timely manner. Such disclosures are due in 30 days but, according to the NASD's sanction order, over half of LPL’s reports were late.
The investigation was commenced as a result of complaints by securities attorneys, including the law firm of Shepherd Smith Edwards & Kantas LTD LLP, and others, that securities firms were ignoring requirements to notify regulators of customer complaints, regulatory actions and even criminal charges and conviction in a timely fashion. Some disclosures were made years after the events, often only after broker left the firm and some were never filed.
The industry wide investigation resulted in censures and fines totaling $9.2 million against 29 firms, including LPL. The NASD states that over 8,000 disclosures of reportable information about brokers at these firms were late.
Regulators must rely upon firms to make timely disclosure because oversight of more than 665,000 registered brokers at nearly 5,300 registered firms is otherwise extremely difficult. Securities firms chose decades ago to be “self-regulated”. “Investors, regulators and others rely heavily on the integrity of the information in the CRD public reporting system … and the integrity of that system depends on accurate and prompt reporting by firms,” said an NASD official.