LPL finds itself in the headlines for the third time this week as a former adviser gets charged by the SEC for stealing $2 million from clients.
An adviser formerly affiliated with LPL Financial LLC was charged by the Securities and Exchange Commission today with defrauding investors and misappropriating $2 million from at least six clients.
The former LPL adviser, Blake Richards, misappropriated client money that “constituted retirement savings and/or life insurance proceeds from deceased spouses,” according to the civil complaint, which was filed in U.S. District Court for the Northern District of Georgia.
To gain one investor's trust, Mr. Richards delivered pain medication during a snowstorm to a client's husband who had been diagnosed with terminal pancreatic cancer, according to the SEC complaint.
The charges against Mr. Richards come on the heels of two other negative headlines this week for LPL, the largest independent-contractor broker-dealer, with more than 13,000 reps and advisers. LPL is not named in the SEC complaint against Mr. Richards.
On Tuesday, the Financial Industry Regulatory Authority Inc. fined LPL $7.5 million for 35 separate e-mail system failures.
On Wednesday, Massachusetts securities regulators said LPL had been ordered to pay $4.8 million in restitution to investors over improper sales of nontraded real estate investment trusts, more than double the amount originally revealed. Massachusetts regulators in February had said LPL would be required to set aside at least $2.2 million in restitution.
Mr. Richards was an LPL broker from May 2009 until this month, according to his profile on Finra's BrokerCheck website.
A call to Mr. Richards' firm, Lanier Wealth Management in Buford, Ga., was not returned.
He was reported to the company by another adviser, LPL spokeswoman Betsy Weinberger said.
“We launched an investigation that resulted in his termination the next day. We informed the SEC, Finra, the FBI, the state of Georgia and local law enforcement,” she said, adding that Mr. Richards did not take client funds from LPL accounts.
According to the SEC complaint, Mr. Richards was a marginal broker at LPL.
“Richards, whose production at LPL Financial had been virtually nonexistent over the past few years, began siphoning off funds from clients, and converting them for his personal use,” the complaint stated. The SEC claim against Mr. Richards shows earmarks of a classic “selling away” case, in which brokers use outside business activities to defraud investors. Broker-dealers may be held accountable when investors want their money back in such cases.
When investors allegedly told Mr. Richards they had funds to invest from a retirement account rollover or proceeds from a life insurance policy, he allegedly told them to write out checks to an entity called “Blake Richards Investments” or “BMO Investments.”
