Indicating it still had unfinished and costly business with regulators,
LPL Financial Holdings Inc. cut its third-quarter earnings forecast by 11 cents a share after the markets closed Tuesday. In afternoon trading Wednesday, LPL shares were down 7%.
The company now expects its broker dealer,
LPL Financial, to incur up to $23 million in charges in the third quarter to satisfy regulatory concerns, or $18 million more than previously anticipated. Those revised charges will lead to an expected impact of 11 cents on diluted earnings per share. That's roughly 25% less in diluted earnings than LPL had previously expected; the company revised down its expected earnings per share to be 32 cents to 34 cents, or in the range of $32 million to $34 million.
Those charges are due to “regulatory matters relating primarily to issues involving
LPL Financial's systems, policies and procedures,” the company said in a statement after the market closed.
"Beginning in the last weeks of the third quarter, we made progress towards the resolution of certain regulatory matters that contributed to us taking a larger than expected charge," stated Mark Casady, chairman and CEO of
LPL Financial, in a statement. "The nature of these matters makes it challenging to identify and evaluate the exact timing and magnitude of their resolution, but we are now able to estimate the potential costs associated with addressing these regulatory matters.”
The company, which will hold a conference call on October 30 to discuss its earnings, expects net revenues to be in line with prior expectations, increasing to $1.1 billion.
The largest independent broker-dealer in the nation with 13,600 registered reps and financial advisers,
LPL Financial has been in regulators cross-hairs for the past two years for a number of issues.
Massachusetts securities regulators said last week that LPL had agreed to reimburse senior citizens $541,000 for surrender charges they paid when they switched variable annuities, marking the second time in four months that the firm has been sanctioned by state securities regulators' over sales and exchanges of variable annuities.
LPL Financial at the end of June was hit with a $2 million fine and ordered to pay $820,000 in restitution for failing to maintain adequate books and records documenting variable annuity exchanges, known as 1035 exchanges. The fine and settlement were part of an agreement with the Illinois Securities Department.
In 2013, LPL was hit with a $7.5 million fine from the
Financial Industry Regulatory Authority Inc. for almost three dozen separate significant e-mail system failures; in the same year, it agreed to pay $4.8 million in restitution to Massachusetts clients who bought nontraded real estate investment trusts.
