LPL Financial has been fined $150,000 by Finra over allegations that it failed to stop a registered representative from using client funds as part of a Ponzi scheme.
The broker-dealer agreed to the penalty as part of a settlement with Finra.
Finra said that the unidentified rep at the center of the case caused five LPL customers to transfer more than $650,000 from their LPL accounts or annuity contracts to an entity or accounts held at a third-party custodian that belonged to the rep. The funds were then converted by a third party.
The violations occurred from September 2018 through August 2019.
Finra said it initiated the investigation after LPL filed an amended Form U5 or termination notice in August 2019 disclosing that the advisor allegedly had been associated with a Ponzi scheme in which he “moved [a customer’s individual retirement account] to a different administrator and used forged documentation to invest [the customer’s] money” in the scheme.
Finra said LPL ignored several warning signs that the representative was involved in outside business activity. First, the regulator said LPL was aware that the advisor conducted minimal business through LPL. In September 2018, the advisor had earned less than $900 in annual compensation and “had stopped working for the…
