LPL censured and fined $375,000 over brokered CD record keeping

Finra says firm did not have adequate risk-disclosure procedures in place

The Financial Industry Regulatory Authority Inc. has censured LPL Financial and fined it $375,000 for having inadequate procedures in place to fully disclose all material risks and features of brokered certificates of deposit that it sold to customers.

From 2010 to 2016, Finra said, LPL sold $533 million worth of brokered CDs in nearly 8,000 transactions, generating over $1.6 million in firm revenues.

The regulator said that during that time, LPL failed to implement a “supervisory system reasonably designed to ensure that its registered representatives were trained on all of the material risks and features of the brokered CDs and that the firm adequately disclosed all material risks and features of the Brokered CDs to customers.”

As a result of the deficient supervisory system, Finra said that an LPL rep made material misrepresentations to five elderly customers regarding the limitations on the ability, upon death, of their estates to redeem their 20-year brokered CDs at par value.

The five elderly customers or their estates suffered losses of approximately $75,000 because they were unable to fully redeem the brokered CDs and had to sell them in the secondary market. LPL subsequently remediated the customers’ losses, Finra said.