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LPL Financial Fined $5.5 Million by FINRA

LPL Financial Fined $5.5 Million by FINRA. FINRA, Broker-Dealer, Brokerage, Financial Industry Regulatory Authority, FINRA Regulator, Regulatory, Financial Services

The Financial Industry Regulatory Authority has censured and fined LPL Financial LLC, the nation’s largest independent broker-dealer, for failing to supervise direct business transactions which caused LPL to maintain inaccurate records, according to the recent letter of acceptance, waiver, and consent.

According to FINRA, from January 2012 to August 2019, LPL violated several FINRA rules when it did not take the necessary action to ensure that its representatives reported direct business transactions on the company’s trade blotter used to identify potential sales practice violations. Because of this, FINRA claimed that approximately 830,000 such transactions did not appear on the blotter. Additionally, for approximately two million more direct business transactions, LPL also failed to ensure that it collected information for customers’ investment profiles that was relevant for making certain suitability determinations, such as a customer’s age, time horizon, or liquidity needs.

FINRA also stated that, from February 2016 through June 2020, LPL sent customers approximately 11,300 switch letters containing inaccurate information regarding the charges customers incurred when switching from one security to another.

Finally, from May 2017 to November 2022, FINRA reported that LPL failed to establish, maintain, and enforce a supervisory system, including written procedures, reasonably designed to ensure that recommendations of publicly traded securities of business development companies (listed BDCs) complied with certain FINRA rules and Regulation Best Interest’s (Reg BI) Care Obligation.

LPL consented to a censure, a $5.5 million fine, restitution of $651.374.51 plus interest, and agreed that it will remediate its listed BDC issues and implement a supervisory system in order to achieve compliance with Reg BI regarding the firm’s listed BDC issues.

As reported previously by The DI Wire, LPL was fined and censured earlier this year $3 million for failing to properly supervise two reps who allegedly transmitted customer funds to outside accounts.

LPL Financial supports more than 21,000 financial advisors, 1,100 institution-based investment programs, and 500 independent RIA firms nationwide.

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