B-D failed to supervise adequately ex-rep in Oregon who flogged the investments; some clients in their 80s
LPL Financial LLC was fined $100,000 yesterday by the state of Oregon for failing to supervise a broker that sold high-risk oil and gas partnerships to clients, including many who are elderly.
The Oregon Department of Consumer and Business Services said that a former LPL rep, Jack Kleck, sold the oil and gas investments to nearly three dozen Oregon residents. The partnerships were not suitable for the clients, given their age and investment objectives, according to a statement by the department.
State officials said that, in one instance, Mr. Kleck sold $40,000 of general partnership units and $45,000 in high-yield bonds to an 89-year-old client who Mr. Kleck described as "mentally lost" and "confused."
Mr. Kleck was a broker with LPL in the rural town of La Grande, Ore., from 2000 to 2006, when he voluntarily resigned, according to his profile on the BrokerCheck website of the Financial Industry Regulatory Authority Inc.
He then joined Pacific West Securities Inc. for about four months; he has not been registered with a securities firm since 2007. Oregon revoked his license that year and fined Mr. Kleck $100,000 but suspended $70,000 of that, according to his profile with Finra.
LPL Financial is the largest independent broker-dealer in the country, with about 12,800 affiliated registered reps and investment advisers.
LPL violated several securities laws, including failing to supervise the actions of Mr. Kleck and failing to ensure that company policies and procedures were enforced, according to the statement from the department. Many of his clients were in their 70s and 80s, and some were not capable, due to poor health, of making sound investment decisions, the Department said.
“LPL Financial has taken numerous steps to improve its compliance and supervisory practices,” the department said. “The company has increased the number of employees devoted to compliance- and supervision-related functions, increased its pre-sale review of transactions and enhanced branch office examinations.”
“LPL Financial worked closely with the Division of Finance and Corporate Securities to resolve the matter, which was isolated and limited to one adviser,” said LPL spokesman Michael Herley. “As a matter of practice, the firm always looks for opportunities to enhance the effectiveness of its compliance, supervisory and surveillance systems, and will continue to do so in the future.”
