FINRA Securities and Variable Annuity Securities Fraud and Mismanagement Attorney, Russell L. Forkey, Esq.
LPL Financial Corporation, nka LPL Financial LLC (CRD #6413, Boston, Massachusetts) submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $175,000. Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that despite the rollout of the new Annuity Order Entry (AOE) system and the firm’s attestation to FINRA that it had implemented the rollout, the firm failed to enforce the mandatory usage of the AOE system until a later date. The findings stated that the firm had entered into an AWC relating to its failure to reasonably supervise its variable annuity exchange business. The findings also stated that in the AWC, FINRA found that the firm had inadequate automated systems and written procedures for variable annuity exchanges reported on the electronic branch trade report system (eBTR). The findings also included that at the time the firm entered into the AWC, it was in the process of upgrading its centralized online order-entry system to switch from the eBTR to the AOE in order to enhance the firm’s overall review of variable annuity exchange transactions.
FINRA found that as part of the AWC, FINRA required that the firm retain an independent consultant to review and make recommendations regarding the AOE system and the firm’s procedures to reasonably ensure that the firm complied with federal securities laws and NASD rules relating to the exchange of variable annuities. FINRA also found that the firm attested to FINRA that it had implemented the rollout of the new AOE system and when the rollout was completed, the firm amended its written supervisory procedures to make the use of the AOE system mandatory, with minor exceptions, for all registered representatives who engaged in variable annuity exchange transactions. In addition, FINRA determined that the firm failed to enforce the mandatory usage of the AOE system and, as a result, the firm’s registered representatives entered orders for approximately 15 percent of the firm’s variable annuity exchange transactions using the eBTR system instead of the AOE system. Moreover, FINRA found that by failing to enforce the mandatory use of the AOE system, the firm failed to enforce its written supervisory procedures relating to variable annuity exchange transactions. (FINRA Case #2009017682701).