In what is being called the SRO’s largest fine to date over e-mail violations, the Financial Industry Regulatory Authority announced that it is fining LPL Financial LLC $7.5 million over 35 key e-mail system failures. The financial firm also has to set up a $1.5 million fund to compensate customers that may have been impacted. That is a total of $9 million.
According to FINRA, the e-mail and retention issues took place between 2007 and 2013, with LPL’s systems failing a minimum of 35 times. The brokerage firm allegedly did not fulfill its duty to supervise representatives, capture email, and answer regulator requests.
For more than four years, LPL purportedly did not supervise 28 million business emails that involved thousands of independent contractor representatives. The broker-dealer also is accused of making misstatements to the SRO during the latter’s investigation into the matter (email systems failures made it impossible for the firm to give over certain documents).
By settling, LPL is not denying or admitting to the securities fraud allegations.
Under securities industry rules, broker-dealers must keep and review emails for a certain length of time to make sure that procedure compliance is happening and to prevent possible wrongdoing. In a statement, the financial firm said that it was the one that notified FINRA about the e-mail issues. LPL says that not only did it fully cooperate with the SRO’s probe but also, regretting what happened, it is redesigning email systems and related compliance procedures and policies and working with independent experts. The firm says it is training employees so that in the future these kinds of oversights are identified and dealt with more quickly. Meantime, Reuters is reporting that in the wake of recent fines LPL has agreed to pay over abusive securities sales practices allegations, it is redoing its procedures related to its supervision of 13,000 advisers.
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