LPL Financial botched required registrations and disclosures for several hundreds of its agents and reportable events over a six-year span, according to a prominent state regulator.
LPL agreed on June 25 to pay a fine of $1.1 million to settle allegations by Massachusetts Secretary of the Commonwealth William Galvin’s office. The No. 1 independent broker-dealer failed to properly register 651 representatives and disclose 787 reportable events in a timely manner, the regulator says.
While LPL neither admitted nor denied the allegations, the firm did pledge to review its policies and procedures as part of an overhaul under the consent order settling the case. The firm’s regulatory expenses
LPL and a North American Securities Administrators Association state task force led by Galvin
“This is not the first time that we have had dealings with LPL, and I think that this case serves as an example that my Securities Division will continue to closely monitor those who have been found to be conducting securities business in Massachusetts without being registered,” Galvin said in a statement.
LPL also issued a statement on the latest settlement with Galvin’s office.
“We continue to enhance our controls around timeliness of regulatory reportings and licensing,” spokesman Jeffrey Mochal said. “This is part of our ongoing focus on effective risk management and compliance practices that protect our advisors and their investors.”
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Increased captive insurance coverage due to expanded business in 2018 was a primary driver of a three-year high in regulatory spending, the firm says.
April 24 -
The regulator and one of its largest members, LPL Financial, engaged in a back-and-forth on the controversial initiative.
May 16 -
The No. 1 IBD has stopped offering the higher-yield funds in its automated bank deposit programs, but it notes they’re easily accessible in investment accounts.
June 19
LPL’s violations occurred approximately between March 2013 and April 2019, according to the consent order. Out of the 651 representatives it didn’t register as agents, two-thirds served retail clients in the state and nearly one-third acted as supervisors to one or more reps, the document states.
The almost 800 reportable events the firm didn’t disclose to Galvin’s office on time included more than 450 judgments or liens, 200 client complaints, a dozen criminal events and nine terminations, investigators say. Companies must file them as amendments to Forms U4 and U5.
Late disclosure led to Galvin’s office approving new registrations with different firms for at least two former LPL advisors — even though each had pending client complaints alleging damages of more than $1 million, according to the document.
LPL filed one of the rep’s U5 amendments 46 days late and the other 303 days late, Galvin’s office says. Since LPL had yet to disclose the cases, regulators say they approved the advisors’ new registrations without knowing about them.
