LPL Financial isn't out of the regulatory woods just yet -- but is hoping to get there by the end of the year.
Cleaning up "historical items" that have led to numerous compliance problems over the past year "isn't quite complete yet," says LPL chairman and chief executive Mark Casady, who adds that there will be "more [lawsuits] to settle" this year.
But Casady says he does expect lingering compliance issues to be "all done in 2015."
LPL's most recent brush with regulators came earlier this month in New Hampshire, when state securities regulators told the company to pay $3.6 million for investigative costs and restitution to investors for the sale of hundreds of "unsuitable or unlawful nontraded REITs" going back to 2007.
New Hampshire also threatened to rescind the company's license to sell securities in the state -- although a regulatory official characterized the threat as one of the "potential outcomes" that the state includes in its boilerplate language.
LPL was unable to reach a settlement in New Hampshire and is currently "working through the legal process" with the state, Casady says. While LPL understands its "obligations to investors" who may have "inadvertently" lost money "though limitations that go with alternative investments," the company "doesn't agree" with the New Hampshire's conclusions, Casady says.
Regulatory problems dogged the nation's largest broker-dealer in 2014, when LPL paid over $36 million in regulatory charges -- about four times what it averaged in 2013 and 2012, pulling down the company's net income last year by 2%.
LPL has addressed the problem head on, Casady maintains, having undergone a "tremendous journey to change our compliance and risk management infrastructure," as well as instituting a "core rebuilding" of its oversight process.
The rapid growth of the company -- from 3,400 advisors 12 years ago to over 14,000 today -- contributed to the infrastructure issues, he says.
The regulatory problems have not been "a happy moment" for the company, Casady admits. But , he says, LPL is eager to "get the historical problem behind us."
- New Hampshire Regulators Latest to Pursue LPL Over Nontraded REITs
- Regulatory Woes Ease for LPL
- Here's What LPL's CEO Made in 2014 -- and Why He Got a Pay Cut
- Regulatory Woes Hammer LPL Profits
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access