FINRA Hits LPL Financial with $6.5 Million Fine Over Supervisory and Compliance Failures

FINRA charged that LPL failed to establish and maintain an adequate supervisory system.

The Sonn Law Group is investigating allegations that LPL Financial failed to establish and maintain an adequate supervisory system. If you or a family member has suffered losses investing, we want to discuss your case. Please contact us today for a free review of your case.

LPL Financial agreed to pay a $6.5M penalty to settle FINRA charges alleging that LPL failed to establish and maintain a supervisory system compliant with FINRA Rules concerning recordkeeping, fingerprinting, and screening of non-registered individuals associated with the firm.

Pursuant to FINRA’s announcement, LPL stated, “We take our compliance obligations seriously, and have been proactive in identifying, reporting, and remediating these issues. We’ve made significant investments to strengthen our capabilities related to this important work.”

FINRA alleged that between January 2014 and September 2019, LPL did not have a supervisory system with written procedures that were reasonably designed to achieve compliance with some of its record retention obligations. Thus, the firm was in violation of failing to retain electronic records in the required format, preserving certain electronic records, and notifying FINRA prior to employing electronic storage media.

LPL’s failure to institute a supervisory system affected over 87 million records and led to over 1.5 million customer communications being permanently lost, according to FINRA. While a majority of these violations occurred in the six-year time period referenced above, some violations remained “ongoing”. 

FINRA also alleged that LPL failed to send required account notices to over a million customers, which included mutual fund switch letters, 36-month letters, and wire transfer confirmations. These documents are required to be preserved for a minimum of three years.

LPL’s failures allowed at least one disqualified person to affiliate with the firm, despite the individual’s prior conviction for forgery. One LPL broker, James Thomas Booth, exploited the firm’s deficiencies and perpetuated a Ponzi scheme, defrauding LPL customers of at least $1 million.  Booth was sentenced to 42 months in prison for his role in the scheme.

LPL has reportedly hired third parties to help address the failures in their recordkeeping, fingerprinting, and consolidated report violations. LPL must receive written authorization from FINRA prior to terminating its relationship with any third parties. 

Contact Us Today

The Sonn Law Group is currently investigating allegations that LPL Financial failed to establish and maintain an adequate supervisory system. If you or your loved one experienced investment losses, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.