FINRA Fines LPL Financial LLC for Supervisory Failures Related to Sales of Alternative Investments

FINRA fined LPL Financial LLC ("LPL") for supervisory deficiencies related to the sales of alternative investment products, including non-traded real estate investment trusts ("REITs"), oil and gas partnerships, business development companies ("BDCs"), hedge funds, managed futures and other illiquid pass-through investments.

FINRA found that, from January 1, 2008 to July 1, 2012, LPL failed adequately to supervise the sales of alternative investments that violated concentration limits. According to the Action, LPL used a manual process to review whether an investment complied with suitability requirements, relying on information that was at times outdated and inaccurate. FINRA found that the firm later implemented an automated system for review, but that database contained flawed programming and was not updated in a timely manner to reflect suitability standards accurately. Furthermore, FINRA stated that LPL did not adequately train its supervisory staff to analyze state suitability standards as part of their suitability reviews of alternative investments.

See: LPL Financial LLC Action.