Stoltmann Law Offices is a Chicago-based investor-protection and securities law firm offering representation to clients nationwide on a contingency fee basis in arbitrations and litigation. We have extensive experience representing investors against LPL Financial for numerous investor-related violations including most ominously, “selling away” by their registered representatives. Historically, LPL has had issues maintaining adequate supervision of their financial advisors/registered representatives, as evidenced by the multitude of regulatory actions against the firm for supervisory failures, over many years.
As the saying goes, the more things change, the more they stay the same. Another LPL financial advisor was busted for “selling away” – which is securities industry lingo describing when a financial advisor sells an investment to investors that is “not approved” by the brokerage firm. This scheme involved Upper Saddle River, New Jersey-based LPL financial advisor Michael Mandel who sold interests in a tequila business to approximately 17 investors, many of whom were LPL clients. According to published reports, Mandel only received about $5,000 in compensation for selling the investment, but also received a promise of equity participation in the Tequila company. It should come as no surprise, the tequila business was a scam and the investors lost everything.
According to regulatory filings, Mandel was fired by LPL Financial in January 2022 in connection with his participation in the tequila company. LPL suggests Mandel was terminated for “failing to disclose” the activity to the firm, which is technically correct, but far from where the story ends for LPL. In truth, the entire concept of “selling away” means there is a failure by the advisor to accurately disclose outside activities. Of course, if Mandel went to his boss at LPL and told them he wanted to sell his clients investments in some tequila company, LPL would have told him in no uncertain terms that he was forbidden from the affiliation. What happens instead is, financial advisors move forward with selling these sorts of investments without the firm’s knowledge. It happens all of the time, and companies like LPL know it.
That does not take LPL off the hook legally for two critically important reasons. First, everything Mandel did with his clients in connection with recommending investments was cloaked in his LPL affiliation. It is likely that investors believed that the offering was legitimate and possibly even vetted by LPL. This agency relationship means LPL could be liable for any losses sustained by these investors. Second, regardless of agency, LPL has an independent obligation to supervise Mandel pursuant to FINRA Rule 3110.
Investors who were caught up in this tequila company scam could have legitimate claims to purse against LPL Financial through FINRA Arbitration. If you invested in this tequila company through Mandel, please contact Stoltmann Law Offices at 312-332-4200 for a free-no-obligation consultation with a securities attorney. We are a contingency fee firm, so we do not get paid until you do!
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