BOSTON (Reuters) - LPL Financial Holdings has reached a $26 million settlement with state securities regulators resolving claims that the U.S. broker-dealer was negligent in supervising employees and preventing the sale of unregistered securities to customers.

The settlement was announced on Wednesday by state securities regulators in Massachusetts and Alabama, who said the deal will also ensure that LPL buys back securities that were illegally sold to investors.

“Because of the states’ combined efforts, thousands of investors will benefit and be given the right to have their money returned plus interest,” Massachusetts Secretary of the Commonwealth William Galvin said in a statement.

The settlement followed an investigation led by regulators in Massachusetts and Alabama that covered conduct they said took place over the past 12 years.

The North American Securities Administrators Association (NASAA), which established a task force to probe LPL, said investigators found it failed to maintain adequate systems to supervise employees and prevent the sale of unregistered securities.

LPL Financial, the largest U.S. independent broker-dealer by revenue, said it will pay a $499,000 fine to each of the 52 U.S. states and territories if they choose to participate in the deal. California has chosen not to participate, LPL said.

“We take our compliance and risk management obligations seriously and will continue to dedicate resources to this important work moving forward,” LPL said in a statement.

Under the settlement, customers who were sold unregistered securities since October 2006 will be offered the full amount they paid plus 3 percent interest.

LPL also agreed to a “top-to-bottom” review of the integration of new securities products to determine the company’s ability to comply with various states’ securities registration requirements, NASAA said.