FINRA Censures and Fines LPL Financial $3 Million

The Financial Industry Regulatory Authority has censured and fined LPL Financial LLC for failing to properly supervise two reps who allegedly transmitting customer funds to outside accounts.

From May 2018 to August 2020, FINRA says LPL failed to “establish and maintain a system reasonably designed to supervise the transmittal of customer funds by wire or check to third parties and to respond reasonably to red flags of potential conversion.”

During this period, FINRA says two LPL representatives, not affiliated with each other, converted approximately $2.4 million from 13 LPL customers through third-party transfers.

From May 2018 to May 2019, FINRA says an LPL representative converted funds from nine of his customers, five of whom were seniors, by convincing his customers to issue 36 checks totaling $550,000 from their LPL brokerage accounts payable to an entity that the advisor did not disclose that he controlled. Instead of using the money for investments for his customers, he used the funds to pay for his own personal and business expenses.

In August 2020, a different LPL registered representative allegedly converted funds from four of his customers, three of whom were seniors, by convincing three of his customers to wire money from their LPL accounts to an outside business he controlled. FINRA says he misappropriated approximately $675,000 of the customers’ funds for his own personal use. Separately, that same month, he also electronically forged the signature of a different senior customer on a wire transfer form to transfer approximately $1.2 million from her LPL account to a law firm in connection with his own purchase of real estate.

FINRA says LPL violated FINRA Rules and that, in addition, from January 2018 through January 2022, LPL failed to have a supervisory system reasonably designed to detect possible instances of signature forgery or falsification.

During this period, FINRA says at least 50 LPL registered representatives electronically signed another person’s name on over 1,000 LPL documents, including on documents which were required books and records of the firm.

LPL consented to a censure, a $3,000,000 fine and restitution of $100,000 plus interest.

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