The Financial Industry Regulatory Authority suspended an ex-LPL Financial broker from association with any FINRA member in any capacity for five months for violating FINRA rules by setting up and using two unapproved email accounts to correspond with customers about securities business and circumvent LPL’s supervision of his business, according to FINRA.
Without admitting or denying the findings, Donald G. Padilla signed a letter of acceptance, waiver and consent May 21 in which he agreed to the suspension and a $10,000 fine. FINRA accepted the letter Wednesday.
LPL and Patrick R. Mahoney, the Beverly Hills, California, attorney who represented Padilla, did not immediately respond to requests for comment Wednesday.
Padilla became associated with LPL in April 2009, became registered as a general securities representative there the following year, and remained associated with LPL until December 2015, according to the FINRA AWC letter.
Padilla voluntarily resigned from LPL Nov. 4, 2015, while the firm was “conducting a review of the use of an unapproved email address as well as the removal and/or concealment of such emails from office computers prior to an announced LPL Branch Exam,” according to a disclosure on his profile at FINRA’s BrokerCheck website.
In a broker comment included on that disclosure, Padilla said: “When I originally joined LPL, we intended to use an Outlook email system for all of our LPL business purposes. However, we learned that implementing the system through LPL’s approved vendors was going to be very expensive and we chose not to use it for that purpose. Instead, we decided to use the Outlook communication system solely for internal purposes between members of the firm, such as calendars, and personal emails and messages. We also used it for some insurance business that was conducted outside of LPL but was fully disclosed to LPL. It was never intended to be nor was it used for communications with securities account customers. Before we began using LPL’s Compliance Max system, it was my understanding that our Outlook communication system was indeed approved for internal use. In fact, an LPL employee told us that our system was approved since 2/8/2011 when our DBA was approved. We have since been told that it was not. As soon as we were advised of the problem and before making the decision to leave LPL, we made efforts to bring our system in full compliance with LPL’s requirements.”
Regarding the deletion of emails on the Outlook system, he said that was “entirely a routine house-keeping issue and had nothing to do with any upcoming branch inspection.” He added: “The Outlook email was not used for any LPL business, but was used mainly for personal and calendaring matters. Email was routinely deleted when no longer of any relevance. There was not any intention to conceal these emails from any LPL supervisory representatives and I am confident that any deleted emails would have been of no interest to anyone conducting a branch inspection.”
Padilla’s use of the unapproved email accounts to conduct LPL-related securities business prevented the firm from preserving records of his communications with clients, according to FINRA. The emails included, among other things, account funding confirmations, portfolio recommendations, fee summaries and trade confirmations, according to FINRA.
As a result of his actions, Woods violated FINRA Rules 2010 (governing standards of commercial honor and principles of trade), 3110 (governing supervision) and 4511 (governing general requirements for books and records), according to FINRA.
Padilla is no longer registered as a broker or RIA, according to BrokerCheck. After leaving LPL, he joined Kestra. However, he was discharged from that firm March 28, 2018, following allegations that he failed to follow that firm’s policy, “specifically in relation to correspondence requirements and marketing designations,” according to a disclosure on BrokerCheck.