LPL Financial, LLC, headquartered in Boston, Massachusetts, was censured and fined $900,000.00 by Financial Industry Regulatory Authority (FINRA) based upon consenting to findings that the firm failed to distribute account notices containing customer suitability information. Letter of Acceptance, Waiver and Consent, No. 2015045887301 (Dec. 21, 2016).
According to the AWC, between 2009 and 2016, the firm did not create and transmit at least 1,670,000 account notices to customers, as Exchange Act Rule 17a-3(17)(i) required of the firm. Particularly, the account notices, which contain information regarding the customers’ investment objectives, were evidently required to be sent to customers within 30 days of opening an account, and every thirty-six months afterwards in circumstances where suitability determinations had been made. The AWC indicated that the notices were designed to address differences in understanding between customers and the firms regarding investment objectives and the customers’ financial circumstances.
The AWC indicated that the failures were caused in part by the firm’s loss of data or possession of incomplete records. Apparently, the firm’s systems did not consider hold recommendations as part of an event which triggered the thirty-six month period. FINRA found that the firm’s failure to transmit the notices and retain records regarding the notices constituted violations of FINRA Rules 2010 and 4511, NASD Rule 3110, as well as Exchange Act Rule 17a-3(17)(i).
FINRA also cited the firm for failing to set forth adequate supervision protocols and procedures for purposes of ensuring that the firm would comply with its obligations pertaining to the retention of records and books. Particularly, the firm’s existing processes did not require review to be conducted by supervisory personnel or establish another process for purposes of ensuring that customers received account notices. FINRA found that the firm’s supervisory failures in this regard were violative of FINRA Rules 2010 and 3110, as well as NASD Rule 3010.
This is not the first time that LPL Financial has been disciplined by FINRA for related misconduct. Particularly, LPL was previously censured and fined $7,500,000.00 by FINRA based upon consenting to findings that between 2007 and 2013, the firm committed supervisory failures regarding retention and review of e-mail correspondence, which caused the firm to be unable to respond to regulatory requests. Letter of Acceptance, Waiver and Consent, No. 2012032218001 (May 2013). The firm was found to have violated NASD Rule 3110, Securities Exchange Act Section 17(a), and Rule 17a-4.
Further, in June of 2014, LPL Financial was censured and fined $2,000,000.00 by Illinois Securities Department based upon consenting to findings that the firm, between 2009 and 2013, did not reasonably apply its supervision procedures regarding variable annuity transaction documentation, and did not reasonably retain records and books associated with the transactions. Letter of Acceptance, Waiver and Consent, No. 1200385 (June 2014).
Additionally, the firm was censured and fined $10,000,000.00 by FINRA based upon consenting to findings that the firm’s failed supervisory procedures and systems, particularly those pertaining to the retention of records and books, constituted violations of FINRA Rule 4511, NASD Rule 3110, Securities Exchange Act of 1934 Section 17(a), and Rule 17a-3. Letter of Acceptance, Waiver and Consent, No. 2013035109701 (May 2015).
Guiliano Law Group
Our practice is limited to the representation of investors. We accept representation on a contingent fee basis, meaning there is no cost to you unless we make a recovery for you. There is never any charge for a consultation or an evaluation of your claim. For more information, contact us at (877) SEC-ATTY.
