LPL Financial Holdings Inc must pay $11.7 million for "widespread supervisory failures," including sales of a risky type of exchange traded fund and other complex securities, the Wall Street's industry-funded watchdog said on Wednesday.
The "supervisory breakdowns" also included the firm's lax surveillance of trading in customer accounts, the Financial Industry Regulatory Authority (Finra) said.
LPL neither admitted nor denied Finra's allegations, the regulator said. The $11.7 million sanction includes repayment of $1.7 million to certain customers, Finra said.
Finra said LPL failed to supervise sales of some kinds of ETFs, variable annuities and non-traded REITs. The firm did not have a system to monitor the length of time that customers held non-traditional ETFs in their accounts, did not enforce its limits on the concentration of those products in customer accounts, and failed to ensure that all of its registered representatives were adequately trained on the risks of the products, Finra said.
"Also, LPL failed to supervise its sales of variable annuities, in some instances permitting sales without disclosing surrender fees, and in connection with certain mutual fund 'switch' transactions, it used an automated surveillance system that excluded these trades from supervisory review. Additionally, LPL failed to supervise non-traded REITs by, among other things, failing to identify accounts eligible for volume sales charge discounts," Finra said in a press release.
LPL Financial has already remedied, or is in the midst of working to remedy, these issues, the company said in a prepared statement.
"LPL has made a long-term commitment to rebuilding its risk management and compliance infrastructure, and this resolution is a significant step in that process," it said.
— Financial Advisor contributed to this article.