LPL Financial has been fined $100,000 for failing to properly oversee one of
its brokers in Oregon who sold risky investments to people, many of them
elderly and without the mental capacity to make investment decisions.
The Oregon Division of Financial and Corporate Securities says LPL
Financial, a division of LPL Investment Holdings Inc.,, has since improved
it oversight procedures.
The fine stemmed from the actions of Jack Kleck, branch manager for LPL
Financial in La Grande, Ore., who sold investments in high-risk oil and gas
partnerships to nearly three dozen Oregon residents. Many of the investors
were elderly and the investments were not suitable for the clientele, given
their age and investment objectives, the division says.
The division found LPL Financial violated securities laws, including failing
to diligently supervise the actions of its broker and failing to ensure
company policies and procedures were enforced.
Kleck’s securities license was revoked in 2007, barring him from doing
business in Oregon, and a subsequent investigation led to the fine against
LPL, says Melanie Mesaros, division spokeswoman. Kleck was fined $30,000.
Many of Kleck’s clients were in their seventies and eighties and some were
not capable, due to poor health, of making sound investment decisions, the
“This case underscores the importance of investing with individuals and
firms licensed by the state of Oregon,” says David Tatman, division
administrator. “The state examines licensed brokerage firms and the division
will take appropriate action against firms that do not comply with the law.”
LPL has taken numerous steps to improve its compliance and supervisory
practices, the division says. The company has increased the number of
employees devoted to compliance and supervision related functions, increased
its pre-sale review of transactions and enhanced branch office examinations.
Michael Herley, LPL spokesman, says, “LPL Financial worked closely with the
Division of Finance and Corporate Securities to resolve the matter, which
was isolated and limited to one advisor. As a matter of practice, the firm
always looks for opportunities to enhance the effectiveness of its
compliance, supervisory and surveillance systems, and will continue to do so
in the future.”