LPL Financial was ordered Monday by Massachusetts regulators to pay up to $3.7 million in restitution and fines to investors as a result of an investigation into sales of unsuitable variable annuities by a former top-producing adviser based in Boston.
At the start of last month, Secretary of the Commonwealth of Massachusetts William Galvin charged LPL with a failure to supervise Roger Zullo, a top-producing broker who allegedly committed fraud in selling unsuitable variable annuities to retirees. In the complaint, Mr. Galvin cited “paper thin compliance” at LPL.
The order requires LPL to offer about $2.5 million in restitution to retirees and other older investors, many of whom worked in the health care field. The order also fines LPL $975,000 and requires disgorgement of $208,000 in commissions.
The Massachusetts Securities Division's complaint against Mr. Zullo is ongoing, according to a statement from Mr. Galvin's office.
“We take our responsibility to supervise very seriously and are committed to serving our investors,” said LPL spokesman Jeff Mochal in a statement. “We are pleased to have worked with the state of Massachusetts to resolve this matter.”
“The facts in this case make clear that seniors and retirees continue to be prey to unscrupulous advisers targeting 401(k) and 403(b) roll-over assets to gain high commissions on unsuitable products,” Mr. Galvin said in a statement. “With the risk of the Department of Labor's fiduciary rule being dismantled, it is crucial that states step in to fill this void.”
LPL has been dealing with numerous compliance issues the past several years. In 2014 and 2015, LPL paid more than $70 million in regulatory fines and restitution to clients. Its CEO, Mark Casady, retired at the end of last year and was replaced by the former president, Dan Arnold.