LPL Financial Holdings Inc.
) has been slapped with a fine by the Financial Industry
Regulatory Authority (FINRA) on Monday. The Boston, MA-based
financial advisor has to pay $950,000 due to its inappropriate
supervisory activities pertaining to the sale of alternate forms
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Though LPL Financial did not accept or deny the charges, it has
agreed to pay the amount. Moreover, the company has consented to
initiate a comprehensive review process to lower the risk of
failures in the future.
Earlier, the manual process followed by LPL Financial to review
portfolios before the tentative investments relied on faulty
database, which was later replaced by an automated review system.
Nevertheless, the automated system also generated flawed results
as the data was based on inaccurate programming and was not
Investors often rely on professional advisors like LPL Financial,
which help them to diversify their portfolio while minimizing
risk. The concentration limits of alternate investment in a given
portfolio are usually pre-set by these financial advisors as well
as the state.
However, after investigations, the FINRA found that from Jan 1,
2008, to Jul 1, 2012, LPL Financial had violated the set limits.
The portfolios were biased toward alternate investments, which
included non-traded real estate investment trusts (REITs), oil
and gas partnerships, business development companies (BDCs) and
LPL Financial also marketed faulty investment products that
lacked liquidity. Further, supervisory activities provided by the
company's under-trained brokers misled investors and subjected
them to considerable market risks.
With the recent shift in the overall investor preference,
alternate form of investments are no doubt gaining popularity.
However, these are risky when compared to the conventional form
Though careful regulatory scrutiny results in one-time expenses
for the firms, it ensures investors security and paves the way
toward a more sustainable development.
LPL Financial currently carries a Zacks Rank #4 (Sell). However,
some better-ranked investment brokers include
GAIN Capital Holdings, Inc.
Investment Technology Group Inc.
Piper Jaffray Companies
). All these stocks sport a Zacks Rank #1 (Strong Buy).