2016
LPL Financial LLC was reprimanded and will pay a $95,000 fine for supervisory failures related to a former agent who obtained $2 million in loans from a LPL client. Texas Securities Commissioner John Morgan entered the Consent Order on Feb. 18.
The fine will go into the General Revenue Fund of the State of Texas.
LPL initiated a Financial Statement Review of the agent after receiving a tip that the agent had received a loan from a client. The analyst who performed the review noted a $1 million deposit listed on a bank statement, and the agent provided the name of an entity purportedly associated with the deposit. That entity included the last name of the one of the agent’s clients.
The analyst, however, did not compare the name with the agent’s client list and therefore missed the fact the $1 million was a loan. After the financial review was closed, LPL failed to maintain documentation of the review. Eighteen months later, the same client made another $1 million loan to the agent.
In August 2014, LPL received a second tip about potential misconduct by the agent involving a loan and the possible inappropriate sales of investments by the agent. LPL’s subsequent investigation resulted in the termination of the agent one month later. LPL voluntarily disclosed the results of its investigation to State Securities Board staff.
Since 2011, LPL has conducted reviews of financial activity in the accounts of agents who do business through fictitious or DBA names. The written supervisory procedures for the reviews require that analysts get an explanation for all deposits that are not LPL commissions and exceed $1,000.
In May 2015, the State Securities Board staff initiated an investigation into LPL’s financial statement reviews covering nine months in 2011 and seven months in 2014. The investigation found that some reviews weren’t conducted according to LPL’s supervisory procedures.
LPL provided substantial cooperation with the State Securities Board staff’s investigation.
Besides the fine and reprimanded, the order requires LPL to continue further improvements in the procedures for the financial statement reviews.