LPL Financial (CRD#: 6413) is a large brokerage firm headquartered in Boston, Massachusetts. As of November of 2018, LPL Financial is licensed to operate in 53 U.S. states and American territories. According to BrokerCheck, this firm has 181 disclosures on its record, including 123 regulatory events and 54 FINRA arbitration claims.
On October 30th, 2018, the Financial Industry Regulatory Authority (FINRA) publicly censured the brokerage firm, fined it $2.75 million, and ordered it to review its supervisory systems and written supervisory procedures related to reporting customers complaints and other suspicious activity.
FINRA: LPL Financial Failed to Report Investors Complaints and Other Suspicious Activity
FINRA identified two significant problems with LPL Financial supervisory protocols and reporting system.
The first issue was related to the manner in which LPL Financial identified and reported suspicious activity. More specifically, FINRA determined that the brokerage firm had an unreasonably designed anti-money laundering policy in place. As a result, LPL Financial failed to report and investigate more than 400 suspicious transactions that should have been detected.
In addition, regulators found that LPL Financial was not properly reporting many of its customers’ complaints. When an investor files a complaint against LPL Financial or any of its individual representatives, that complaint should be reported to FINRA unless the customer is eligible to obtain less than $5,000 in total compensatory damage.
FINRA assesses that LPL Financial interpreted this requirement in an unreasonably narrow manner — the brokerage firm did not report any customer complaint in which the investor did not expressly request financial compensation, even though some of those complaints involved losses in excess of $5,000. This was improper.
Without admitting or denying the misconduct alleged by securities industry regulators, LPL Financial consented to the findings and the proposed penalties, including the $2.75 million fine. LPL Financial also agreed to review nearly 700 investor complaints filed over the last several years to determine which, if any, should have been reported to regulators.
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