MONTPELIER, Vt. — Today the Vermont Department of Financial Regulation (DFR) announced it has entered into a settlement agreement with LPL Financial LLC (LPL) that requires the firm to pay the State of Vermont $499,000 and to repurchase certain securities sold to Vermonters dating back to October 2006. A $400,000 civil penalty will be deposited into the state’s General Fund with the remaining $99,000 being deposited into the department’s Investor Education Fund.
Michael Pieciak, DFR Commissioner, applauded the efforts and coordination of his fellow state regulators.
“This settlement demonstrates that state regulators can work together effectively to police our financial markets and protect our citizens,” he said. “The settlement’s civil penalties send a strong message of deterrence to other companies and the contribution to the Investor Education Fund will strengthen our department’s efforts to improve Vermonters’ financial literacy as they plan for major life events.”
The settlement stems from a multi-state investigation regarding LPL’s failure to establish and maintain reasonable policies and procedures to prevent the sale of unregistered, non-exempt securities to its customers.
The settlement finds LPL failed to maintain adequate systems to reasonably supervise agents, staff, and employees to prevent unregistered sales. The settlement also provides the firm failed to maintain books and records necessary to ensure full and proper compliance with state securities laws and failed to conduct appropriate and necessary due diligence regarding the retention, use, and subsequent cancelation of certain third-party services critical for compliance with state securities laws.
In total, LPL will pay $26 million in civil penalties to the 52 jurisdictions participating in the multi-state settlement. In addition, any Vermont LPL clients holding securities determined to have been unregistered, non-exempt equity, or fixed-income securities sold since October 1, 2006 will receive an offer to repurchase the securities at the original purchase price plus three percent interest per year.
As part of the settlement, LPL also agreed to a “top-to-bottom” review of the integration of new securities products to assess the firm’s ability to comply with all state securities registration requirements and to adhere to all operations and procedures in connection with state registration requirements, that apply to the offer and sale of that product. The firm also agreed to a similar review of its vendor-service protocols to ensure processes are in place to identify and manage critical services used to ensure compliance with state securities laws.
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