FINRA fined and censured LPL Financial for failing to adequately supervise its broker by ignoring red flags of the broker's prohibited outside business activities. FINRA furthermore found that the broker transferred $650,000 in customer funds to an outside entity described in the investigation as a Ponzi scheme. To do so, the broker purportedly and unsuitably recommended clients surrender existing fixed and variable annuities and use those proceeds to buy into what the investigation deemed was a fraudulent enterprise, resulting in customer losses.
According to FINRA's report, the first red flag LPL Financial failed to investigate was that its broker conducted "minimal business" through LPL—that is to say, the broker continued affiliating with LPL, but suspiciously earned less than $900 annually through the firm. Instead of investigating the broker's activities, the LPL office supervisor tasked with overseeing him informed the firm that the broker would no longer be supervised whatsoever, due to low activity.
Despite failing to investigate this prominent red flag, LPL Financial missed a second opportunity when it failed to investigate the broker's claim during an annual compliance questionnaire in which the broker disclosed that he used social media for business purposes without LPL's permission to do so. Had LPL investigated, the firm would have discovered that the broker had actually listed the outside business activity on the social media profile page—a disclosure made online in public, but that LPL Financial through its supervisory failure failed to learn of.
Finally, LPL failed to investigate the broker's e-mails to and from clients which also would have indicated the undisclosed outside business activity and Ponzi scheme.
FINRA barred LPL broker Rhett Douglas Bedwell (CRD #5664392) in 2021, writing that its investigation centered around allegations that Bedwell used forged documents to invest customer funds in a Ponzi scheme.
If you invested with LPL Financial broker Rhett Bedwell or with any other brokerage firm whose failure to supervise its broker resulted in losses or other damages as the unsupervised or undisclosed outside business activity turned out to be a Ponzi scheme or some other fraud resulting in harm, please call an experienced FINRA arbitration attorney at The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.