The Financial Industry Regulatory Authority has fined LPL Financial LLC $2.75 million for complaint-reporting and anti-money laundering program failures that spanned a period of more than three years.
FINRA found that LPL failed to file or amend registered representatives’ Forms U4 or U5 to disclose dozens of reportable customer complaints. FINRA claims that the broker-dealer too narrowly interpreted the requirement that a complaint contain “a claim for compensatory damages of $5,000 or more” to be reported.
“LPL incorrectly construed this phrase to mean that the firm was not required to report any complaint that did not expressly request compensation, even when the customer alleged a sales practice violation that caused a loss of $5,000 or more, and the complaint, when viewed as a whole, made clear that the customer was seeking compensation,” said FINRA.
FINRA also found that LPL failed to investigate numerous attempts to gain unauthorized access to electronic systems that should have resulted in the filing of suspicious activity reports.
This failure apparently stemmed from the firm’s use of a “fraud case chart” that provided what FINRA deems as inaccurate guidance to its AML employees concerning investigation and reporting requirements when third parties used electronic means to attempt to compromise a customer’s email or brokerage account. As a result, FINRA claims that LPL failed to file more than 400 suspicious activity reports.
In April 2015, FINRA fined LPL $10 million and ordered a nearly $1.7 million restitution payment to customers after its automated anti-money laundering surveillance system failed to generate alerts about excessive withdrawals from automated teller machines.
In determining the appropriate monetary sanction, FINRA considered LPL’s “extraordinary cooperation and undertaking to remedy its violations.” In settling the matter, LPL neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
LPL Financial provides service to approximately $681 billion in brokerage and advisory assets as of the third quarter of 2018. The company provides proprietary technology, comprehensive clearing services, practice management programs and training, and independent research to more than 16,000 financial advisors and 700 financial institutions.