- Wednesday, October 16, 2024
LPL Financial has reached an agreement to pay over $6 million in order to settle claims made by Finra. The claims allege that the company failed in its duty to properly supervise transactions and recommendations made by its brokers. Additionally, it is claimed that LPL sent out inaccurate information to its customers.
In a letter of acceptance, waiver, and consent submitted to Finra, LPL acknowledged the findings without admitting or denying them. As a self-regulatory organization for the brokerage industry, Finra holds sway in matters such as these.
"LPL takes its compliance obligations seriously and fully cooperated with the Finra investigation, including self-reporting certain identified issues," stated the company in an email to 's Advisor. "LPL is pleased to have resolved these matters."
LPL is the largest independent broker-dealer in the country, working alongside more than 22,000 financial advisors. The majority of these advisors operate as 1099 contractors.
Finra's claims stem from the period between January 2012 and August 2019. During this time, LPL allegedly lacked a sufficient system to ensure that direct business transactions, placed by brokers on behalf of customers, appeared on its daily trade blotter. This blotter is used by the company to identify potential sales practice violations.
LPL Financial Fined $5.5 Million by Finra for Compliance Failures
Failure to Collect Adequate Customer Information
According to a letter from Finra, LPL did not possess an appropriate system to collect essential details about the investment profiles of its direct business customers. This information plays a key role in determining whether specific investments are suitable for customers. As a result, LPL's failure to supervise direct transactions led Finra to accuse the company of not maintaining accurate books and records.
Misstated Fees and Lack of Supervision
Non-Compliance with Securities Rules
Furthermore, Finra alleged that from May 2017 to November 2022, LPL did not ensure that recommendations regarding publicly traded securities of business development companies (BDCs) complied with relevant securities regulations, including Regulation Best Interest's care obligation.
Settlement Agreement
To resolve these claims by Finra, LPL has accepted a censure and will pay a fine of $5.5 million. Additionally, the company will provide restitution totaling $651,374.51 plus interest to affected customers.
This finding highlights the importance of robust compliance systems within financial institutions and emphasizes the significance of supervising transactions effectively.
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