FINRA

WITHOUT ADMITTING OR DENYING THE FINDINGS, CHAO CONSENTED TO THE SANCTIONS AND TO THE ENTRY OF FINDINGS THAT CHAO PARTICIPATED IN NINE PRIVATE SECURITIES TRANSACTIONS TOTALING $1.27 MILLION WITHOUT HIS MEMBER FIRM'S APPROVAL. THE FINDINGS STATED THAT CHAO HAD REQUESTED APPROVAL AND THE FIRM DENIED HIS REQUEST. ALTHOUGH CHAO DID NOT RECEIVE ANY DIRECT COMPENSATION FOR HIS CUSTOMERS' TRANSACTIONS, THE FIRM SELLING THE PRIVATE SECURITIES WAIVED APPROXIMATELY $8,000 IN FEES ASSOCIATED WITH CHAO'S MOTHER'S PURCHASE IN THE PRIVATE SECURITIES. CHAO TOOK STEPS TO CONCEAL HIS PARTICIPATION IN THE PRIVATE SECURITIES TRANSACTIONS FROM HIS FIRM. CHAO REGULARLY USED AN UNAPPROVED EMAIL ADDRESS FOR COMMUNICATIONS RELATED TO HIS CUSTOMERS' TRANSACTIONS WITH THE FIRM SELLING THE PRIVATE SECURITIES. IN ADDITION, CHAO PROVIDED FALSE AND MISLEADING ANSWERS IN HIS FIRM'S COMPLIANCE QUESTIONNAIRE BY STATING THAT HE HAD NOT PARTICIPATED IN ANY PRIVATE SECURITIES TRANSACTIONS AND FAILING TO DISCLOSE HIS USE OF AN UNAPPROVED EMAIL ADDRESS. THE FINDINGS ALSO STATED THAT CHAO PROVIDED FALSE AND MISLEADING STATEMENTS TO FINRA REGARDING HIS INVOLVEMENT IN THE PRIVATE SECURITIES TRANSACTIONS. THE FINDINGS ALSO INCLUDED THAT DURING SEPARATE AUDITS OF CHAO BY HIS FIRM, THE FIRM NOTIFIED CHAO THAT HIS STAFF HAD USED BLANK SIGNED FORMS AND UNAPPROVED EMAIL ADDRESSES. CHAO, HOWEVER, FAILED TO TAKE ADEQUATE STEPS TO ENSURE THAT THE OFFICE'S FILES WERE PURGED OF EXISTING BLANK SIGNED FORMS, THAT HIS STAFF STOPPED USING BLANK SIGNED FORMS, AND THAT HIS STAFF DID NOT USE UNAPPROVED EMAIL ADDRESSES. CHAO WAS A BRANCH MANAGER OF ONE OF HIS FIRM'S BRANCHES.

Acceptance, Waiver & Consent(AWC)

Civil and Administrative Penalty(ies)/Fine(s)

$30,000.00

Requalification

Suspension

ANY CAPACITY

TWO YEARS

8/17/2015

8/16/2017

Fines paid in full on March 1, 2019.

LPL FINANCIAL LLC

Discharged

TERMED FOR CAUSE FOR VIOLATING FIRM POLICIES AND PROCEDURES RELATIVE TO PARTICIPATION IN PRIVATE SECURITIES TRANSACTIONS AWAY FROM THE FIRM WITHOUT FIRM AUTHORIZATION.

SOME OF OUR CLIENTS APPROACHED US TO INVEST IN FACEBOOK PRE-IPO. MY RESEARCH TEAM DID SOME BACKGROUND WORK AND FOUND A FEW COMPANIES THAT WERE OFFERING INVESTORS SHARES OF PRE-IPO FACEBOOK. THES COMPANIES INCLUDED SHARESPOST, SECONDMARKET AND FELIX INVESTMENTS. WE COMMUNICATED TO OUR CLIENTS THE COMPANIES THAT WOULD BE ABLE TO HELP THEM IN PRE-IPO FACEBOOK, AND SOME OF THEM SELECTED TO WORK WITH FELIX INVESTMENTS BECAUSE OF THE ATTRACTIVE SHARE PRICE. WE GAVE THEM INFORMATION TO CONTACT FELIX INVESTMENTS DIRECTLY. ALTHOUGH WE DID NOT RECEIVE ANY TYPE OF COMPENSATION FOR OUR RESEARCH, LPL ACCUSED US OF SELLING AWAY.