A financial company is facing a substantial lawsuit for an allegedly badly timed share buyback program.
A report by InvestmentNews outlines that LPL Financial Holdings, the name behind LPL Financial, is facing action from Charter Township of Clinton Police and Fire Retirement System. It has alleged a $250 million stock repurchase last year – with the company and its shareholders losing $115 million. In addition the lawsuit alleges that the LPL’s chief financial officer Matthew Audette and CEO and chairman Mark Casady failed to disclose poor financial results and made false statements.
The complaint suggests that stock in the company was artificially high at the end of last year. That is when Audette and Casady reportedly alleged that a share buyback would be the best use of commission revenue and the firm’s capital.
Reality however, is that by the middle of February stock slipped by 41.6 per cent and revenues slumped by 75 per cent.
According to the publication, TPG Capital is not named in the complaint. TPG is the private equity firm that bought a majority stake in LPL in 2005. However, the lawsuit does allege that the repurchase plan yielded $187 million in insider sales and that if the buyback had been postponed the company would have saved around $115 million.
It’s not the first time that LPL has had issues - it ran into problems with regulators in the past due to supervisory failures relating to the failure to return mutual fund fees and sales of complex investments.