JAMES MICHAEL O'BRIEN AKA JAY O'BRIEN SUSPENDED BY FINRA FOR SELLING UNAUTHORIZED INVESTMENTS

James Michael O'Brien aka Jay O'Brien, a broker formerly with Boston, Massachusetts based LPL Financial LLC, submitted a letter of acceptance, waiver, and consent after the Financial Industry Regulatory Authority (FINRA) entered findings that Mr. O'Brien participated in private securities transactions outside the regular course and scope of his employment with his member firm. Mr. O'Brien neither provided notice of these transactions to the firm nor did he receive approval. Mr. O'Brien, of Encinitas, California, was suspended from association with any FINRA member in any capacity for 18 months. FINRA's findings stated that Mr. O'Brien referred investors to an entity that sold them securities in the form of promissory notes. The total dollar amount of the investments was $2,654,596. For these referrals, Mr. O'Brien was compensated a total of $125,416. The suspension is in effect from January 7, 2013 through July 6, 2014.
Selling away is the inappropriate practice of an investment professional who sells or solicits securities or investments not held, approved, or authorized by the brokerage firm with which the professional is associated. Under NASD and FINRA rules, brokerage firms must approve investments offered by their investment professionals and supervise its sales.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from broker misconduct. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages due to Mr. O'Brien's fraudulent activity can bring forth claims to recover losses against LPL Financial, which should have prevented Mr. O'Brien from committing the described illegal activity.
Have you suffered losses in your LPL Financial LLC brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against LPL Financial LLC stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

LPL FINANCIAL CENSURED AND FINED FOR FAULTY SUPERVISORY SYSTEMS GOVERNING DELIVERIES OF MUTUAL FUND PROSPECTUSES

LPL Financial LLC, a Boston, Massachusetts based brokerage firm, submitted a letter of acceptance, waiver, and consent to resolve Financial Industry Regulatory Authority (FINRA) findings that it failed to establish and maintain an adequate supervisory system and written supervisory procedures (WSPs) reasonably designed to ensure timely delivery of mutual fund prospectuses. FINRA's findings stated that the firm was required to provide each of its customers who purchased a mutual fund with a prospectus for that fund no later than three business days after the transaction. The firm executed approximately 16 million mutual fund purchase or exchange transactions, and several million of these transactions required the firm to deliver a mutual fund prospectus to the purchasing customer. Therefore, the firm was required to establish and maintain a supervisory system and WSPs reasonably designed to monitor and ensure the timely delivery of mutual fund prospectuses. FINRA censured and fined the firm a total of $400,000 for all violations committed.
A prospectus is a document that discloses important information about an investment. It typically provides investors with material information about mutual funds, stocks, bonds, and other investments. Such information generally includes a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties, and any other material information.
In addition, FINRA's findings stated that the firm relied on its brokers for the delivery of mutual fund prospectuses. Each broker was required to obtain the customer's signature on a prospectus receipt form to have a record of the delivery. However, the firm did not have a supervisory system in place that was reasonably designed to ensure that prospectus receipts had been obtained in connection with mutual fund purchases or that a prospectus had actually been delivered timely. The firm's WSPs did not require an adequate review of its brokers' performance of their prospectus delivery obligations. Instead, the firm's procedures consisted of inadequate measures. FINRA further stated that for some time, the firm was aware that its procedures were failing to ensure that brokers consistently obtained prospectus receipts or other evidence of mutual fund prospectus delivery. On at least two occasions, the firm contemplated proposals to adjust its procedures for tracking prospectus delivery compliance, but the firm did not modify or enhance its procedures and continued to rely upon brokers without adequate safeguards to ensure and monitor mutual fund prospectus delivery.
Have you suffered losses in your LPL Financial brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against LPL Financial stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

LPL FINANCIAL INVESTOR ALERT - LAX SUPERVISION OF INDEPENDENT BROKERS CAN CAUSE LOSSES

LPL Financial LLC is a subsidiary of the LPL Financial holdings, Inc. It is the largest independent broker-dealers whose business model is akin to a franchise operation. LPL Financial is headquartered in Boston, Massachusetts and reportedly has over 12,500 registered representatives across the United States operating in one or two person offices. Its growth in recent years can largely be attributed to layoffs at the major wire houses due to the most recent financial market meltdown. Most of LPL Financial's registered representatives' gross production of revenues is less than $300,000 per year. Its branch offices are largely comprised of small producers earning commissions at higher pay out rates than the major full-service brokerage firms, a recipe for disaster when it comes to protecting investors' rights.
Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors' rights and interests as their lowest priority.
The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor's compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers.
Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients' signatures on documents, the placement of inaccurate information about a client's investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices. These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms.
Have you suffered losses in your LPL Financial brokerage account? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against LPL Financial stockbrokers who engaged in stock brokerage misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

LPL FINANCIAL SUED FOR REIT SALES PRACTICES

The Commonwealth of Massachusetts Securities Division has recently charged LPL with "dishonest and unethical business practices." The Massachusetts complaint focused on seven Real Estate Investment Trust (REIT) products:

• Inland American
• Cole Credit Property Trust II, Inc.
• Cole Credit Property Trust III, Inc.
• Cole Credit Property 1031 Exchange
• Wells Real Estate Investment Trust II, Inc.
• W.P. Carey Corporate Property Associates 17
• Dividend Capital Total Realty

The individual brokers and advisors who sold non traded REITs are not targets of this investigation. According to securities attorney Robert Pearce, "the brokers weren't targeted because the regulators believed the problem stems from LPL's faulty training and mass marketing of these illiquid investments to LPL Financial sales representatives who then blindly sold them to their unsuspecting and trusting clients. The result was excessive quantities of these unsuitable investments in too many LPL Financial client accounts without regard to their financial needs and condition."
For most investors, liquidity, income and risk tolerance are a concern, but if you are elderly and retired they are paramount! If you have limited resources and no ability to generate income from other sources to meet your liquidity and income needs then a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investor's portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!
Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule, but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of an individual's stated investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").
The primary cause of the increased number of telephone calls to our office over the last five years is many elderly and retired investors have been steered into non-traded REIT investments as the yields on other income producing investments have steadily declined. According to many investors, the REITS were recommended as safe, secure, and steady income producing investments which sounded to be exactly what many seniors wanted and needed. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market for REITs, and early redemption of shares in REITs is often very limited. In addition, the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment, which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.
Have you suffered losses resulting from an investment in any REIT purchased from LPL Financial? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against LPL Financial who fraudulently offered and sold the REITs to investors.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

LPL FINANCIAL, LLC FINED FOR FAILURE TO DELIVER PROSPECTUSES TO INVESTORS

LPL Financial, LLC (LPL), for the third time in the last thirty days, has been fined by the Financial Industry Regulatory Authority (FINRA) for violation of securities industry rules and regulations relating to the protection of investors. This time LPL failed to implement and maintain adequate supervisory systems and procedures to monitor and ensure the timely delivery of mutual fund prospectuses as required by Section 5 of the Securities Act of 1933 (the "Securities Act"), NASD Conduct Rule 3010 and FINRA Rule 2010. FINRA investigators discovered that LPL failed to provide prospectuses to its customers who purchased mutual funds during the period of its investigation - 2009 through 2011 (the "relevant period"). FINRA estimated that LPL may have failed to deliver at least 3.4 million mutual fund prospectuses to its customers during that two year period. There is a high probability that LPL failed to deliver prospectuses in connection with the sale of other products during the relevant period and did not have procedures in place to ensure delivery of any prospectuses to its customers prior to the relevant period. The FINRA investigators found that at least as early as 2007, LPL was aware that its procedures were failing to ensure that its registered representatives were delivering the prospectuses as required under the federal and state securities laws.
The federal and state securities laws require the delivery of a prospectus to investors because it provides them with important information about the product being purchased. Our federal and state securities laws require disclosure of the details of the enterprise in which an investor's putting money so that he can be fully apprised and intelligently appraise the risks involved in his or her particular investment. Not only has LPL violated Section 5 of the Securities Act, but it has also violated Section 10 (b) of the Securities Exchange Acts of 1934 (the "Exchange Act"), which states the time prospectus must be delivered. A prospectus is required to be delivered by a securities broker-dealer before the transaction is complete on the settlement date of the transaction, which in the case of mutual fund transactions, and in most stock transactions, is no later than 3 business days after the order is placed.
The failure to deliver prospectuses in a timely manner is an extremely serious violation. It is not only a violation that can result in sanctions by securities regulator such as FINRA, but it can also give rise to a civil action or arbitration claim by an investor for rescission (to unwind the transaction) under both federal and state securities laws. Alternatively, an investor may recover damages for losses suffered in connection with an investment he or she made through LPL if that investor did not receive a prospectus in a timely manner.
Have you suffered losses resulting from an LPL stockbroker's failure to deliver a prospectus relating to an investment made through that brokerage firm? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.