Alabama Securities Commission Quarterly Meeting Report
September 4, 2018
The AAR Public Policy team attended the Alabama Securities Commission (ASC) quarterly meeting on August 28, 2018.
Summary of the Commission Meeting
Joseph Borg, Director of the ASC, provided a quarterly report on the Commission’s activity. He discussed improvements that are being made to the ASC’s information technology services, provided an overview of the ASC’s expenditures and receipts, and gave an update on enforcement activity.
Among the enforcement activities Director Borg discussed were the ASC’s investigations of cryptocurrency products. According to Director Borg, the ASC has 21 active inquiries or investigations of Initial Coin Offerings (ICOs) and has issued seven Cease and Desist Orders as a part of the ASC inquiry.
Another major topic of discussion was the ASC’s recent settlement order with LPL Financial, LLC.
- LPL Financial is the largest U.S. independent broker-dealer by revenue[i] and was examined by a task force set up by the North American Securities Administrators Association (NASAA), the association of state securities regulators. The investigation was spearheaded by ASC and the Massachusetts Secretary of the Commonwealth’s office. The investigation revealed that LPL “had been negligent in its duty to supervise agents and to prevent the sale of unregistered securities,”[ii] in violation of state securities laws. On May 2, 2018, the ASC and Massachusetts regulator announced that LPL had agreed to pay a fine of $499,000 to each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands, which results in a total fine of $26 million.[iii]
- LPL was previously investigated by the ASC for sales of non-traded real estate investment trusts (REITs) that were not in compliance with state securities laws, in which LPL agreed to pay over $700,000 to affected investors in Alabama.[iv] A REIT is an entity that functions like a public real estate company, selling investment opportunities to the public and using that capital to invest in commercial real estate.
Alabama Securities Commission Background
The ASC is responsible for the enforcement of laws governing securities transactions in Alabama. It administers the Alabama Securities Act (“the Act”), which regulates the activities of securities broker-dealers, agents, investment advisers, and financial planners in Alabama.[v] The ASC also directs enforcement actions against persons who have violated the Act or other state and federal laws to the detriment of Alabama investors.[vi]
[i] “LPL Financial resolves U.S. states' probe for $26 million.” Reuters, May 2, 2018: https://www.reuters.com/article/us-lpl-hldg-settlement/lpl-financial-resolves-u-s-states-probe-for-26-million-idUSKBN1I321D.
[ii] Massachusetts and Alabama Joint Press Release on $26 Million Settlement with LPL Financial, May 2, 2018: http://www.asc.state.al.us/News/2018%20News/05-02-18%20LPL%20Financial%20Settlement.pdf.
[iii] NASAA Press Release on LPL Financial Settlement, May 2, 2018: http://www.nasaa.org/44990/state-securities-regulators-announce-26-million-settlement-with-lpl-financial-llc-involving-sales-of-unregistered-non-exempt-securities/.
[iv] ASC/LPL Consent Order, May 17, 2016: http://asc.alabama.gov/News/2016%20News/5-17-2016-Firm%20Agrees%20to%20Return%20Money.pdf.
[v] Alabama Securities Commission Mission Statement: http://www.asc.state.al.us/about.aspx.