Unsuitable Alternative Investment Sales: LPL Customers Could Recover Losses

Securities fraud attorneys are investigating claims on behalf of customers of LPL Financial LLC. This move comes on the heels of an announcement on March 24, 2014 from the Financial Industry Regulatory Authority (FINRA) which stated that the firm had been fined $950,000 for supervisory failures related to alternative investment sales.

These investments included:

• Non-traded real estate investment trusts, or REITs
• Oil and gas partnerships
• Business development companies, or BDCs
• Hedge funds
• Managed futures
• Other illiquid pass-through investments

For many alternative investments, offering documents, state regulations and the firms themselves impose concentration limits. FINRA’s investigation found that LPL did not adequately supervise alternative investment sales from January 1, 2008 to July 1, 2012 and, as a result, these concentration limits were allegedly violated. In addition, LPL’s supervisory staff allegedly was not adequately trained in analyzing suitability standards.

According to stock fraud lawyers, firms have an obligation to properly supervise their brokers and fully disclose all the risks of a given investment when making recommendations. In addition, those recommendations must be suitable for the individual investor receiving the recommendation given their age, investment objectives and risk tolerance. Securities fraud attorneys believe that many LPL customers may be able to recover losses for unsuitable alternative investments.

“In order to sell alternative investments, a broker-dealer must tailor its supervisory system to these products,” FINRA Executive Vice President and Chief of Enforcement Brad Bennett stated. “LPL exposed customers to unacceptable risks by not having an adequate system in place that could accurately review whether a transaction complies 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.”

If you were an LPL customer who received an unsuitable recommendation of non-traded REITs, oil and gas partnerships, managed futures, BDCs or other illiquid investments, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or newcases@investorlawyers.net for a no-cost, confidential consultation.