Just as LPL Financial Holdings Inc. is in the middle of its acquisition of Commonwealth Financial Network, the giant broker-dealer is also facing the overhang of compliance issues. These issues include signing clients’ emails and using chat apps, which has dogged the firm for years and currently brought again to light by state regulators.
According to South Dakota's Division of Insurance, Department of Labor and Regulation, LPL’s advisors misused email and how they signed off on client documents. LPL in April agreed to pay a penalty of $35,000 to settle the matter.
And in April, LPL agreed to pay a fine of $325,000 to New Hampshire after a financial advisor was allegedly using a chat app to communicate with clients, according to the state’s Bureau of Securities Regulation.
An LPL spokesperson declined to comment.
With 31,000 financial advisors, LPL is the largest broker-dealer in operation ranked via headcount. It’s largest group of advisors is independent contractor reps, who historically have been supervised remotely and off campus via a branch office in the area.
The firm has a history of settlements with regulators concerning off channel communications and misuse of client signatures.
In 2024, LPL, along with more than two dozen firms, agreed to settle claims by the Securities and Exchange Commission due to failures to adequately maintain and preserve electronic communications. LPL’s penalty was $50 million. The SEC’s inquiry focused on unapproved communications methods, including financial advisors’ misuse of WhatsApp.
And according to a 2023 settlement with the Financial Industry Regulatory Authority Inc. that cost the firm $3 million, from January 2018 through January 2022, "LPL failed to have a supervisory system reasonably designed to detect possible instances of signature forgery or falsification."
During that four-year time period, at least 50 LPL sales reps "electronically signed another person’s name on over 1,000 LPL documents, including on documents which were required books and records of the firm," according to Finra. "One was an electronic forgery on a wire transfer request form in August 2020."
According to the settlement with South Dakota, “LPL, through its agents, used their own email address in place of the clients’ email address and signed clients documents on their behalf,” violating state securities laws.
And the advisor in New Hampshire used WeChat, an unapproved social media platform, from December 2018 to August 2021, according to the state’s settlement. The advisor communicated with clients using WeChat messaging and group chat.
The advisor answered questions, promoted investment seminars, and provided information relating to structured notes and mutual funds sold through LPL, according to the settlement.
LPL disciplined the advisor in 2019, but he persisted and was terminated in 2021.
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