Georgia Secretary of State Brian Kemp today announced that Georgia will participate in a settlement with LPL Financial LLC over the sale of unregistered securities. LPL agrees to repurchase from investors certain securities sold since October 2006 and pay civil penalties of $499,000 upon entering a final order.

“This settlement sends a strong message that state regulators hold firms accountable and continue to serve a vital role in protecting investors,” Kemp said. “Georgia investors deserve these protections, and I appreciate that LPL is committed to making this right.”

The settlement stems from an investigation led by state securities regulators from multiple states regarding the failure to establish and maintain reasonable policies and procedures to prevent the sale of unregistered, non-exempt securities by LPL to its customers.

In July 2017, the North American Securities Administrators Association (NASAA), of which Georgia Secretary of State’s Securities Division is a member, established a task force to investigate LPL’s failure to establish and maintain reasonable policies and procedures to prevent the sale of unregistered, non-exempt securities by LPL to its customers. NASAA President Joseph P. Borg said LPL fully cooperated with the NASAA task force.

State securities regulators concluded that LPL offered and sold unregistered, non-exempt securities and failed to reasonably supervise the flow of information to ensure full and proper compliance with state securities registration requirements.

Investigators found that the firm failed to maintain adequate systems to reasonably supervise agents, staff, and employees to prevent the sale of unregistered, non-exempt securities. State investigators also determined that LPL failed to maintain books and records necessary to ensure full compliance with state securities registration requirements, and LPL failed to conduct appropriate and necessary due diligence regarding the retention, use, and subsequent cancelation of certain third-party services critical for compliance with state securities registration requirements.

In addition to a civil penalty, the settlement calls for LPL to offer to repurchase from investors securities held in LPL accounts determined to have been unregistered, non-exempt equity or fixed-income securities sold since October 1, 2006. Each offer also shall include 3 percent simple interest per year. Other requirements were agreed upon for investors holding affected securities sold or transferred from an LPL account.

As part of the settlement, LPL also agreed to a “top-to-bottom” review of the integration of new securities products to assess this firm’s ability to comply with all state securities registration requirements, and all operations and procedures in connection with state registration requirements, that apply to the offer and sale of that product. The firm also agreed to a similar review of its vendor service protocols to ensure processes are in place for identification and management of critical services used to ensure compliance with state securities laws.

“I am proud of Georgia’s involvement in this multi-state effort, and I want to thank our partners for pursuing this settlement for investors,” said Kemp. “Together, we will continue to hold firms accountable for misbehavior.”

A pdf of the settlement terms is attached for reference.

Brian Kemp has been Secretary of State since January 2010. Among the office’s wide-ranging responsibilities, the Secretary of State is charged with conducting secure, accessible, and fair elections, the registration of corporations, and the regulation of securities, charities, and professional license holders. For more information about the office, go to www.sos.ga.gov.