Massachusetts regulators are demanding that LPL Financial pay $2.5 million in restitution to senior investors, along with $975,000 in fines and disgorgement of $208,000 in commissions tied to the sale of unsuitable variable annuities.
The announcement comes nearly two months after LPL Financial was charged with failure to supervise advisor Roger Salvatore Zullo in connection with the VA sales to at least 11 clients, many of whom had worked in the health care sector. Zullo was fired by the independent broker-dealer on Dec. 2.
"The facts in this case make clear that seniors and retirees continue to be prey to unscrupulous advisers targeting 401(k) and 403(b) rollover assets to gain high commissions on unsuitable products," said Secretary of the Commonwealth William F. Galvin, in a statement.
The securities regulators' order notes that LPL's advisor misrepresented clients' ages and their net worth to make them "appear more suitable and that LPL failed to detect various red flags and discrepancies which should would have prevented the harm."
In December, the regulator's office said that Zullo and LPL received more than $1.8 million in variable annuity commissions from 2013 to 2016. About $1.79 million of that came from commissions on the same product, the Polaris Platinum III (B Shares) variable annuity.
The Boston-based advisor "bypassed LPL's paper-thin compliance review process for these sales by fabricating client financial suitability information, such as age and liquid net worth," according to the 84-page complaint.
Galvin's office says the vast majority of Zullo's annuity sales were of Polaris Platinum annuities, which carry a 7% commission — split between Zullo, 90%, and LPL, 10%. In many instances, clients had to pay surrender charges when Zullo persuaded them to switch to the Polaris Platinum annuity.
