LPL Financial

FINRA Suspends Former LPL Financial Broker Walter Chao Over Private Securities Transactions

October 8, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and suspended for two year broker Walter Chao (Chao) (FINRA No. 2012034046301) alleging that between February and May 2012, while registered with LPL Financial LLC (LPL Financial), Chao participated in nine private securities transactions totaling $1.27 million without LPL’s approval. According to FINRA, Chao attempted to conceal his participation in the private securities transactions by using an unapproved email address and providing false and misleading answers in a compliance questionnaire. In addition, FINRA claimed that Chao also provided false and misleading statements to FINRA regarding his involvement in the private securities transactions. In addition, FINRA found that Chao was also a branch manager and failed to adequately supervise certain conduct such as being aware that staff under his supervision were using blank signed forms and unapproved email addresses.

Chao entered the securities industry in June 2003. In August 2007, Chao joined LPL Financial. LPL Financial terminated Chao’s registration in September 2012 for violating firm policies and procedures relative to participation in private securities transactions away from the firm without firm authorization. From October 2012 to January 2015, Chao was registered with Purshe Kaplan Sterling Investments.

FINRA alleged that in late 2011, Chao learned that a firm had created a special purpose vehicle (SPV) to purchase pre-initial public offering (IPO) shares of Facebook. By using the SPV investors could purchase ownership interests in the SPV in order to participate in the Facebook IPO. FINRA found that Chao wanted to solicit his customers to purchase interests in the Facebook SPV but knew that he was required to get approval from LPL Financial before doing so. Chao requested approval but LPL Financial denied his request.

FINRA Bars Former LPL Financial Broker Thomas Caniford From the Industry

September 4, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) barred former LPL Financial LLC (LPL) broker Thomas Caniford (Caniford) after the broker failed to respond to a letter from the regulator requesting information. While BrokerCheck records kept by FINRA do not disclose the nature of the regulatory inquiry, in February 2015, Caniford was terminated by LPL for cause stating that the broker was terminated for 1) having custody and control of client funds in a bank account in violation of firm policy; and 2) failure to provide bank records requested by the firm.

In addition, Caniford has been the subject of at least two customer complaints and four financial liens all tax related. The customer complaints against Caniford allege a number of securities law violations including that the broker made investments in products not approved by LPL, also referred to as “selling away”, and direct theft and misappropriation of funds.

Caniford entered the securities industry in 1982. From March 2004, until March 2008, Caniford was associated with M Holdings Securities, Inc. Thereafter, from March 2008, until his termination in March 2015, Caniford was associated with LPL.

Julius Kenney Formerly of LPL Financial Barred Over Outside Business Activities Investigation

August 11, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred broker Julius Kenney (Kenney) concerning allegations Kenney refused cooperate with requests made by FINRA in connection with an investigation into possible outside business activities. Such activities may, under certain circumstances also involve investment transactions referred to as “selling away” in the industry. According to FINRA BrokerCheck records Kenney has disclosed that he operates as a LPL Financial LLC (LPL Financial) broker under the DBA Frank Kenney Wealth Management in Calhoun, Georgia. There is one customer complaint against Kenney alleging that the broker solicited an investment in a business referred to as Mellow Mushroom in or around October 2013.

Kenney entered the securities industry in 2008, when he became associated with Edward Jones. Thereafter, Kenney became associated with LPL Financial in 2011 before leaving for Dempsey Lord Smith, LLC in July 2012 through September 2013. Finally, in September 2013, Kenney came back to LPL Financial until his termination in June 2015. On May 22, 2015, LPL Financial filed a termination notice (known as a Form U5) with FINRA disclosing that Kenney was discharged from the firm for participating in an undisclosed outside business activity.

The conduct alleged against Kenney may lead to “selling away” securities violations. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though the brokerage firm claim ignorance of their advisor’s activities, under the FINRA rules, a brokerage firm owes a duty to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away often occurs in brokerage firm that either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

Former LPL Financial Broker Robert Tricarico Accused of Stealing Customer Funds

June 25, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Robert Tricarico (Tricarico) concerning allegations that Tricarico failed to respond to the regulator’s requests to provide information and documents concerning the an investigation into claims that Tricarico may have stolen money from clients.

Tricarico entered the securities industry in 1986. From June 2003, until April 2009, Tricarico was associated with Citigroup Global Markets Inc. Thereafter, from March 2009, to May 2011, Tricarico became registered with Wells Fargo Advisors Financial Network, LLC (Wells Fargo). Finally, from May 2011, until January 2015, Tricarico was associated with LPL Financial LLC (LPL).

On a Form U5, LPL terminated Tricarico alleging that the broker was the subject of a lawsuit by the executrix of a deceased client that alleged misappropriation of funds. Thereafter, FINRA sought to investigate LPL’s statements by sending Tricarico requests for information. On January 22, 2015, FINRA sent a letter to Tricarico requesting that Tricarico provide documents and information including his personal bank account records. Despite, multiple requests for information and some additional correspondence with Tricarico and his counsel the broker did not provide sufficient documents and information to cover FINRA’s requests. Accordingly, FINRA imposed a bar from the securities industry.

LPL Financial Broker David Hackney Accused by Regulator of Churning Customer Accounts

June 22, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker David Hackney (Hackney) has recently been permanently barred by the agency for failing to respond to requests for documents and information. In addition, the broker has been under investigation by the Illinois Securities Department concerning allegations that Hackney churned – a type of securities fraud – at least three accounts.

Hackney entered the securities industry in 1993. From March 2006 until February 2014, Hackney was associated with LPL Financial LLC (LPL). In February 2014, LPL discharged Hackney alleging that the broker conducted discretionary, otherwise known as unauthorized trades, in customers’ accounts that were excessive.

Investment churning is trading activity characterized by the purchasing and selling of securities including stocks, bonds, mutual funds, and options that is excessive and serves no practical purpose for the investor. Brokers engage in churning solely to generate commissions without regard for the client’s interests. In order to establish a churning claim the investor must show that the trading was first excessive and second that the broker had control over the investment strategy. Certain commonly used measures and ratios used to determine churning help evaluate a churning claim. These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

LPL Financial Fined $11.7 Million Over Securities Practices

June 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) entered into an agreement whereby the regulatory fined LPL Financial LLC (LPL) and fined it $10 million for broad supervisory failures in a number of key areas, including the sales of non-traditional exchange-traded funds (Non-Traditional ETFs), certain variable annuity contracts, non-traded real estate investment trusts (Non-Traded REITs) and other complex products, as well as its failure to monitor and report trades and deliver to customers more than 14 million trade confirmations. As part of the fine FINRA ordered LPL to pay approximately $1.7 million in restitution to customers who purchased non-traditional ETFs.

In a press release Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, stated that “LPL’s supervisory breakdowns resulted from a sustained failure to devote sufficient resources to compliance programs integral to numerous aspects of its business. With today’s action, FINRA reaffirms that there is little room in the industry for lax supervision and that it will not hesitate to order firms to review and correct substandard supervisory systems and controls, and pay restitution to affected customers.”

This action is only one of many regulatory actions that our firm has tracked concerning LPL and its brokers including the following:

Gana LLP Broker Spotlight: LPL Financial Advisor Karl Romero’s Private Placement Sales

April 27, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Karl Romero (Romero) has been the subject of at least 9 customer complaints over the course of his career. Customers have filed complaints against Romero alleging that the broker made unsuitable investments primarily in private placements and alternative investment related products. Some of the claims appear to involve Romero’s handling of customer accounts and recommendations in the LaeRoc Income Fund, a troubled real estate private placement.

The LaeRoc Funds manage over $650 million in assets and focuses on income producing properties in the western US. The LaeRoc 2005-2006 Income Fund LP in 2011 attempted to raise $11 million to $14.5 million to pay off at least $49 million of debt. The claims against Romero claim breach of fiduciary duty and unsuitable investments.

Romero has been registered with FINRA since 1971. From 1989 to present Romero has been registered with LPL Financial, LLC (LPL). According to public records Romero operates out of a DBA business called Karl H Romero & Assoc Inc.

LPL Financial Advisor Raymond Schmidt Accused of Borrowing Millions for Hawaii Real Estate Investments

April 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently barred broker Raymond Schmidt (Schmidt) due to Schmidt’s refusal to respond to requests made by the agency. FINRA found that from approximately May 2009, through November 2012, Schmidt borrowed approximately $2.25 million from seven customers of LPL Financial LLC (LPL) and also engaged in outside business activities without notifying the firm. FINRA also alleged that between 2009 and 2014, Schmidt submitted five false compliance questionnaires and three false disclosures of outside business activities and loans to the firm.

In July 2006, Schmidt became associated with LPL. In a termination notice dated September 24, 2014, the LPL reported that on August 25, 2014, Schmidt had resigned while under internal review by LPL.

FINRA found that in or around May 2009, Schmidt purchased a real estate investment in Hawaii that he developed into a vacation rental property. In May 2012 that property opened for business. FINRA found that Schmidt was the sole owner and operator of the property and the business but failed to notify LPL of this outside business activity. FINRA alleged that from approximately May 2009, through November 2012, Schmidt borrowed $2,254,818 from seven LPL customers for the purpose of purchasing the real estate in Hawaii and constructing a vacation rental property.

LPL Financial Terminates Charles Fackrell Over Securities Fraud Claims

March 12, 2015 | by Staff Attorney

LPL Financial LLC (LPL) has terminated its former broker Charles Fackrell (Fackrell), registered with The Financial Industry Regulatory Authority (FINRA), alleging that the broker engaged in unapproved private securities transactions (known in the industry as “selling away”) and also due to a felony arrest for obtaining property under false pretenses.

Fackrell entered the securities industry in 2007 and was registered with Morgan Stanley & Co., Incorporated. From July 2008 until December 2009, Fackrell was registered with SunTrust Investment Services, Inc. Thereafter, from December 2009, until June 2010, Fackrell was a broker with Wells Fargo Advisors, LLC.

According to news sources, Fackrell was arrested in January and faces charges of fraud that police now allege involve more than $500,000. In February Fackrell was served warrants and his bond was set at $2.2 million. News reports state that the victims were unsuspecting investors in Yadkinville and surrounding counties.

FINRA Sanctions Former LPL Financial Broker Marc Baldinger Over Private CMO I/O Strip Sales

February 13, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned former LPL Financial LLC (LPL) broker Marc Baldinger (Baldinger) concerning allegations that between August 2010 and November 2012, Baldinger participated in private securities transactions (a/k/a “selling away”) without prior approval of LPL. In addition, FINRA alleged that in connection with these private securities transactions Baldinger failed to disclose his position as a managing partner of two limited liability companies.

Baldinger entered the securities industry on in 1989. Thereafter, from 2001 onward Baldinger was associated with LPL until Baldinger’s employment with LPL ended on November 24, 2012. On December 13, 2012, LPI, filed a Form U5 terminating Baldinger’s registration.

The FINRA rules require that all brokers report securities transactions to their employer. However, FINRA alleged that between August 19, 2010 and November 24, 2012, Baldinger introduced 20 customers to brokerage firms by the initials “RS” and “AFS” and purchased inverse strips of Government National Mortgage Association Interest Only bonds (GNMA I/Os). According to FINRA, the 20 clients invested a combined total of at least $12 million in GNMA I/Os. FINRA found that Baldinger received compensation for these investment recommendations of approximately $233,427.