Regulators fined LPL Financial $2.75 million for complaint-reporting and anti-money laundering issues over a three-year period. The Financial Industry Regulatory Authority said the independent broker-dealer “failed to file or amend registered representatives’ Forms U4 or U5 to disclose dozens of reportable customer complaints.”
Overall, LPL “too narrowly interpreted the requirement that a complaint contain ‘a claim for compensatory damages of $5,000 or more’ to be reported,” the regulator explained.
According to FINRA, the IBD appears to have thought the phrase implied it did not have to report a complaint that did not “expressly request compensation,” even when a client alleged a sales-practice violation caused a loss of $5,000 or more “and the complaint, when viewed as a whole, made clear that the customer was seeking compensation.”
The regulatory group also said LPL did not review more than 400 attempts to gain unauthorized access to electronic systems that should have resulted in the filing of suspicious activity reports (or SARs).
“Forms U4 and U5 in particular serve as an essential source of information to the investing public in deciding whether to entrust their assets with a broker,” said Susan Schroeder, FINRA executive vice president of the department of enforcement, in a statement.
Last year, FINRA reported 16 AML cases, which resulted in $14.6 million in fines. The number of cases decreased by 50% from 32 in 2016, and the fines reported dropped from $45.9 million in 2016 by 68%.
“We’ve made significant investments to enhance our AML program at LPL,” the IBD said in a statement. “We’re pleased that FINRA noted our ‘extraordinary cooperation’ in identifying, self-reporting, investigating and remediating these issues thoroughly and promptly.”
As of Sept. 30, the firm’s advisor headcount was 16,174. It had a net gain of 125 registered reps in the third quarter vs. a net loss of 18 advisors in the second quarter and a net loss of 3 reps in the year-ago period.