Recent fines against LPL Financial levied by Massachusetts financial regulators indicate that some states are serious about enforcing regulations designed to protect seniors, a group often targeted by brokers and financial advisors.
In the latest example, LPL agreed to pay a $250,000 fine to settle charges for “failure to establish and enforce review procedures” related to senior-specific titles, according to Massachusetts’ top financial regulator William F. Galvin.
Galvin’s office said in a news release that an examination of a state-registered investment advisor found a registered representative of LPL was “using a title that did not conform to those senior designation regulations.”
Further inquiry revealed that at least 10 designations used by LPL representatives were “either in violation of the regulation” or were unclear enough to raise concerns among state Securities Division regulators, Galvin said.
A spokesman for LPL said in an email that the company had taken steps to implement “enhanced review procedures” and had agreed to pay the fine.
“The firm is pleased to have reached a mutually agreeable resolution with the Securities Division,” Brett Weinberg said.
LPL supports as many as 14,000 independent and registered investment advisors around the country.
Massachusetts, home to some of the nation’s oldest and most important financial institutions, is serious about enforcing securities laws.
Galvin charged the broker/dealer with failure to supervise Armstrong for running deceptive radio ads targeting seniors last summer.
Armstrong used “alarmist language designed to pull in senior citizens with concerns about Alzheimer’s disease,” according to the state’s complaint.
But in an interview with InsuranceNewsNet’s Arthur Postal, Timothy O. Egan, a lawyer for Armstrong, said Armstrong and his employees were “scratching their heads” at the Massachusetts’s regulator’s complaint.
Egan said Armstrong, who has personal experience with the disease, provided exactly what the radio ads offered: information about a serious disease.
Craig Lemoine, a certified financial planner and professor at The American College, said it helps to place the regulatory action in the context of a post-Dodd-Frank financial world and the Consumer Financial Protection Bureau (CFPB), a consumer watchdog.
Designations usually come from three groups, Lemoine said: organizations that are not accredited by anyone or any organized body, national groups like the American National Standards Institute or the National Commission of Certifying Agencies, and from universities or institutions of higher learning.
“When a group is nationally or regionally accredited, they’ve got some teeth but for a nonaccredited designation there isn’t any of that and that’s when the state comes in,” he said in an interview with InsuranceNewsNet.
Neither Galvin’s office nor LPL indicated what “senior designation” was involved and the broker was not identified. However, Galvin’s office did say that on three occasions LPL had approved the use of a particular title on the agent’s business cards.
Consumer advocates warn that the proliferation of designations by private accrediting organizations has left people more confused than enlightened about the role and expertise of individual advisors.
Seniors are particularly vulnerable because many may not familiar with the details of how financial products work, watchdog groups say. Earlier this year, the Securities and Exchange Commission said that it would conduct further examination of how broker/dealers and advisors work to ensure clients are prepared for retirement.
With the burgeoning number of baby boomers in search of income, seniors offer brokers and financial advisors a fast-growing market. Meanwhile, experts have testified about the need to guard against exploiting older Americans.
Lemoine said that in recent reports, the CFPB has called upon regulators to crack down on fraud and abuse around seniors. There are plenty of laws and regulations already in place, it’s really a matter of enforcing them, he said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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