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February 23, 2024 at 04:17 PM
LPL Financial is facing a fine from the Securities and Exchange Commission of up to $50 million over its lack of compliance with records preservation rules tied to off-channel communications like text messages, according to the firm’s annual report filed Wednesday.
The fine is for “business-related electronic communications stored on personal devices or messaging platforms that we have not approved,” LPL’s annual report states.
The firm added that it had ”not yet reached a settlement in principle with the SEC, and any settlement agreement remains subject to negotiation of the civil monetary penalty and definitive documentation.”
Under the SEC’s proposed resolution, LPL says it would pay up to $50 million as a civil monetary penalty. News of this penalty was first reported Friday by InvestmentNews; the broker-dealer, though, first disclosed details about the matter in its third-quarter report in late October.
The broker-dealer recorded a $40 million expense in the third quarter of 2023 to “reflect the amount of the penalty that is not covered by our captive insurance subsidiary,” its quarterly and annual report state.
On Feb. 9, the SEC charged five broker-dealers, seven dually registered broker-dealers and investment advisors, and four affiliated investment advisors for widespread and longstanding failures by the firms and their employees to maintain and preserve electronic communications, including WhatsApp messages and texts.
