FINRA Fines LPL $2.75 Million for Complaint-Reporting and AML Program Failures
WASHINGTON – FINRA announced today that it has fined LPL Financial, LLC $2.75 million for complaint-reporting and AML program failures that spanned a period of more than three years.
FINRA found that LPL failed to file or amend registered representatives’ Forms U4 or U5 to disclose dozens of reportable customer complaints. LPL too narrowly interpreted the requirement that a complaint contain “a claim for compensatory damages of $5,000 or more” to be reported. LPL incorrectly construed this phrase to mean that the firm was not required to report any complaint that did not expressly request compensation, even when the customer alleged a sales practice violation that caused him or her a loss of $5,000 or more, and the complaint, when viewed as a whole, made clear that the customer was seeking compensation.
FINRA also found that, due to an unreasonably designed AML program, LPL failed to investigate numerous attempts to gain unauthorized access to electronic systems that should have resulted in the filing of Suspicious Activity Reports (SARs). This failure stemmed primarily from the firm’s use of a “fraud case chart” that provided inaccurate guidance to its AML employees concerning investigation and reporting requirements when third parties used electronic means to attempt to compromise a customer’s email or brokerage account. As a result, LPL failed to file more than 400 SARs.
Susan Schroeder, FINRA Executive Vice President, Department of Enforcement, said, “This case highlights FINRA’s persistent focus on ensuring that firms file with the government and with FINRA information critical to the protection of investors and the public. Forms U4 and U5 in particular serve as an essential source of information to the investing public in deciding whether to entrust their assets with a broker.”
In determining the appropriate monetary sanction, FINRA considered LPL’s extraordinary cooperation and undertaking to remedy its violations.
In settling this matter, LPL neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
FINRA is a not-for-profit organization dedicated to investor protection and market integrity. It regulates one critical part of the securities industry – brokerage firms doing business with the public in the United States. FINRA, overseen by the SEC, writes rules, examines for and enforces compliance with FINRA rules and federal securities laws, registers broker-dealer personnel and offers them education and training, and informs the investing public. In addition, FINRA provides surveillance and other regulatory services for equities and options markets, as well as trade reporting and other industry utilities. FINRA also administers a dispute resolution forum for investors and brokerage firms and their registered employees. For more information, visit www.finra.org.