On December 18, 2017, LPL Financial LLC (“LPL”) lost a FINRA arbitration concerning customer claims related to former LPL broker Charles Fackrell. The three-member FINRA panel issued a $462,000 aggregate award to six of Mr. Fackrell’s former clients, an amount which must be satisfied by LPL within 30 days. As we discussed in a previous blog post, Mr. Fackrell (CRD# 5369665) pled guilty last year to one count of securities fraud for operating a $1.4 million Ponzi scheme. According to prosecutors handling the investigation, beginning around May 2012, Mr. Fackrell first engaged in the fraudulent scheme by misappropriating investor funds solicited from at least 20 victims, many from Wilkes County, North Carolina.
In addition to asserting claims of negligence and violations of the North Carolina Securities Act, Mr. Fackrell’s former clients brought claims against LPL for breach of contract, failure to supervise, principal/agent liability, and negligent retention of an agent.
As detailed in publicly available court documents, Mr. Fackrell abused his position of trust with his clients, steering them away from legitimate investments to purported investments with “Robin Hood, LLC,” “Robinhood LLC,” Robin Hood Holdings, LLC,” and “Robinhood Holdings, LLC,” as well as related entities (collectively, “Robin Hood”). These entities were controlled by Mr. Fackrell and provided him with a conduit through which to cover his own personal expenses, including hotel expenses, groceries, purchases at various retail shops, and to make large cash withdrawals.
Court records further indicate that Mr. Fackrell successfully solicited victimized investors by making false and fraudulent representations, including that the investors’ money would be invested in, or secured by, gold and other precious metals. In addition, Mr. Fackrell allegedly falsely told investors that Robin Hood was a safe investment, paying annualized guaranteed returns of 5-7%. In actuality, however, Mr. Fackrell allegedly spent only a fraction of the investor money on such assets, instead diverting approximately $700,000 of his victims’ money back to other investors in classic Ponzi-style payments designed to further the fraudulent scheme.
In October 2017, the State of North Carolina fined LPL $25,000 and ordered the Boston-based brokerage firm to reimburse the state $270,000 in connection with costs incurred investigating Mr. Fackrell.
Mr. Fackrell was discharged by LPL in December 2014. Thereafter, in February 2015, without admitting or denying the findings, Mr. Fackrell consented to sanctions by FINRA, including his being barred from the securities industry based on “findings that… Fackrell converted customer’s funds and sold private securities offerings away from his member firm without the firm’s knowledge or approval.”
Broker-dealers such as LPL are charged with the responsibility to adequately supervise all representatives who are registered through their firm. This supervision includes monitoring the investments sold by their registered representatives. Further, broker-dealers must take steps in order to ensure that their financial advisors follow all applicable securities rules and regulations, as well as internal firm policies. When broker-dealers fail to adequately supervise their registered representatives, this may give rise to liability for investment losses sustained by customers.
The attorneys at Law Office of Christopher J. Gray, P.C. have significant experience in recovering funds on behalf of investors nationwide who have fallen victim to perpetrators of financial frauds, including Ponzi schemes. Investors may contact our office at (866) 966-9598 or firstname.lastname@example.org for a no-cost, confidential consultation.