LPL FInancial Agrees To Pay $541,000 for Faulty Variable Annuity Switches

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Massachusetts securities regulators announced on October 14,2014 that LPL Financial had agreed to reimburse senior citizens $541,000 for surrender charges they paid when they switched variable annuities, marking the second time in four months that the firm has been in state securities regulators’ cross hairs over sales and exchanges of variable annuities.

This is just the latest in a series of regulatory problems faced by LPL. LPL Financial at the end of June was hit with a $2 million fine and ordered to pay $820,000 in restitution, for failing to maintain adequate books and records documenting variable annuity exchanges, known as 1035 exchanges. The fine and settlement were part of an agreement with the Illinois Securities Department.

The Massachusetts agreement covers 157 transactions, all involving persons 65 or older at the time of the transaction and living in Massachusetts. LPL has 15 days to offer the reimbursement to the senior citizens, according to the statement.

LPL Financial, which is based in Boston and San Diego, has drawn the attention of Massachusetts Secretary of the Commonwealth William Galvin’s office in the recent past. In December 2012, Mr. Galvin sued LPL Financial over the sales practices of its brokers regarding real estate investment trusts. He charged LPL Financial with failure to supervise registered representatives who sold the nontraded REITs under terms that violated both state limitations and the company’s rules.

LPL Financial later was one of a half dozen broker-dealers that eventually settled with Mr. Galvin and the Massachusetts Securities Division over the sales practices. LPL agreed to pay $4.8 million in restitution to clients.

In a memorandum of understanding with the Massachusetts Securities Division, LPL Financial “acknowledged that certain annuity switch transactions were conducted in the absence of accurately disclosed surrender charges or in which other determinations were not properly documents,” according to a statement regarding LPL’s variable annuity reimbursement from Mr. Galvin.

“During the Securities Division’s review of the company’s variable annuity switch practices, LPL Financial implemented policies to ensure that customers receive necessary and required disclosure of transactions fees,” according to the statement.

LPL Financial, which has boosted staff and spending on compliance since the beginning of last year, has recently been the focus of regulators for sales of high commission products such as variable annuities and nontraded REITs.

 

IF YOU BELIEVE YOU HAVE BEEN THE VICTIM OF IMPROPER SALES PRACTICES IN CONNECTION WITH VARIABLE ANNUITIES OR ANY OTHER INVESTMENT, PLEASE CONTACT NICHOLAS TALDONE

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