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Regulation and Compliance > Federal Regulation > SEC

LPL, Raymond James Caught in SEC's Messaging Probe

By Melanie Waddell

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LPL Financial and Raymond James & Associates are among the firms being probed by the Securities and Exchange Commission about the preservation of electronic communications stored on personal devices or messaging apps that are not firm-approved, according to their financial statements.

LPL, which made the disclosure in an audited year-end 2022 financial statement dated Feb. 23, 2023, said that it could “reasonably incur losses” as a result of the SEC’s sweep.

The SEC requested records from LPL in October, the firm disclosed, adding that while it could not estimate the amount of any possible loss tied to the probe, it did not expect a material adverse effect on its finances.

Raymond James made a similar disclosure in an audited financial statement for the year ended Sept. 30, dated Nov. 22, stating that the SEC “is reportedly conducting similar investigations of record preservation practices at other financial institutions.”

Raymond James said that while it’s cooperating, the broker-dealer “may contest liability and/or the amount of damages, as appropriate, in each pending matter,” adding “there can be no assurance that material losses will not be incurred from claims that have not yet been asserted or are not yet determined to be material.”

Industry trade groups are raising concerns about an ongoing sweep by the SEC of advisors’ off-channel communications, including text messaging and other electronic communications.

Wells Fargo disclosed in late February that regulators were investigating its retention of employee communications over unapproved messaging apps.

The SEC announced charges last September and $1.1 billion of fines affecting 15 broker-dealers and one affiliated investment advisor, while the Commodity Futures Trading Commission imposed $710 million in penalties on 11 financial institutions over employees routinely communicating about business matters using text messaging applications such as WhatsApp on their personal devices.

Combined with JPMorgan’s $200 million regulatory fine, which regulators announced in December, the total level of penalties over these record-keeping lapses stands at $2.01 billion.

Melanie Waddell

@Think_MelanieW

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