Stoltmann Law Offices, P.C. is a Chicago-based investment fraud and investor rights law firm that offers representation to victims of investment fraud nationwide. We have tried and won many cases against LPL Financial over the years and represented hundreds of investors who were victims of various types of investment fraud as a result of the misconduct of LPL financial advisors.
According to multiple reports, including a complaint filed by the Securities and Exchange Commission, for upwards of ten years, James K. Couture, while a registered representative for LPL Financial based in Boston, Massachusetts, stole upwards of $2.9 million from clients. Couture pulled this off by convincing his clients to sell legitimate securities in their accounts and transfer the funds to an “investment” in a company owned and controlled by Couture called Legacy Financial. Once Couture gained control of his clients’ money, he converted it and spent it for his own use. This is a classic scheme in the brokerage and advisory world known as “selling away”. According to the SEC and the indictment filed by the U.S. Attorney for the District of Massachusetts, Couture kept the scam going by fabricating account statements for his clients that showed money being “reinvested” and also provided account reviews which disguised the fact that he was committed rote fraud. When clients would request withdrawals, Couture would take money from Client A and pay it to Client B, which is the classic sign of a Ponzi scheme.
According to his FINRA BrokerCheck Report, Couture was registered as a licensed securities broker and advisor through LPL Financial from February 2009 through July 2020 out of offices in Worcester and Springfield, Massachusetts. At that point, LPL fired him for cause based on the same misconduct that led to his indictment and the SEC complaint. A few months later, in October 2020, Couture accepted a permanent bar from the securities industry from FINRA when he knowingly failed to respond to a request for information from the regulator in connection with an investigation into his misconduct.
LPL is no stranger to harboring bad brokers and failing to supervise them. Just recently, FINRA fined LPL $6.5 million for multiple compliance failures related to supervision. This was nothing new. On May 6, 2015, FINRA fined LPL $10,000,000 and ordered it to pay $1,664,592 in restitution for repeated systematic and far reaching compliance and supervisory failures. The highlights of this exceptional FINRA enforcement action, which spans compliance failures from January 2007 through 2015 include:
- LPL pursued a strategy to increase its size by acquiring numerous firms, recruiting thousands of new brokers, and almost doubling its revenue, without a “concomitant dedication of sufficient resources to permit the Firm to meet its supervisory obligations.” at 3
- LPL failed to supervise sales of complex non-traditional exchange traded funds, including ignoring LPL’s internal concentration limits. at 4-5.
- LPL failed to supervise variable annuity transactions.
- LPL failed to supervise mutual fund switches and sales of Class C shares. at 6-7.
- LPL failed to supervise sales of non-traded REITs.
- LPL failed to review low-priced equity trades, concentrated positions, actively traded accounts, and employee front-running, resulting in LPL’s failure to timely complete hundreds of thousands of supervisory tasks. at 7-8.
- LPL failed to accurately report trades to the Options Clearing Corporation, failed to report transactions to the Real-Time Transaction Reporting System and accurately report TRACE-eligible securities. at 8-9.=
- LPL failed to deliver trade confirmations affecting 13 million transactions. at 10.
- LPL failed to monitor for suspicious activity in violation of Anti-Money Laundering rules. at 11.
- LPL failed to provide complete and accurate information to regulators.
- LPL failed to supervise advertising and other communications. at 12-15.
- LPL failed to comply with registration requirements.
All told, this AWC specifies that LPL violated “numerous federal securities law and FINRA and MSRB rules” including:
|1. NASD Rule 3010(b)||2. FINRA Rule 2010||3. FINRA Rule 2330(c)|
|4. NASD Rule 3010(a)||5. NASD Rule 2110||6. FINRA Rule 2360(b)(5)|
|7. MSRB Rules G-14, G-15, G-27||8. NASD Rule 6230||9. FINRA Rule 6730|
|10. § 10, Exchange Act Rule 10b-10(a)||11. FINRA Rule 3310(a)||12. NASD Rule 2230|
|13. § 17 of the Exchange Act||14. SEC Rule 17a-3||15. FINRA Rule 4511|
|16. NASD Rule 3010(d)(3)||17. NASD Rule 2210(d)(1)(B)||18. NASD Rule 2210(c)(2)|
|19. MSRD Rule G-27||20. FINRA Rule 1122||21. Article V, Sections 2 and 3, FINRA By-Laws|
|22. Rule 204(a)(1), Reg. SHO|
The introduction to this AWC details a sordid fiasco of regulatory and compliance events faced by LPL over the years. Id. at 1-3. In total, FINRA references twelve different actions regarding conduct between March 2005 and 2013 imposing fines totaling $13,790,000.
Stoltmann Law Offices has unique experience prosecuting investor claims against LPL, especially those involving selling away and Ponzi schemes. If you were a victim of James Couture or any LPL Financial brokers or advisors, please contact Stoltmann Law Offices, P.C. for a free, no obligation initial consultation with a securities attorney. We offer representation nationwide to victims of investment fraud on a contingency fee basis which means we do not get paid until you do!