On Oct. 30, FINRA fined LPL on complaint-reporting and AML.
- LPL Financial fined for complaint-reporting and AML failures spanning three years.
- Violated FINRA Rules 1122, 3110, 3310, 2010, NASD Rule 3010, and the by-laws.
Disclosure of Complaints
- Firm did not file or amend registered representative forms, to disclose complaints.
- LPL too narrowly interpreted the requirement, that complaint contain “a claim for compensatory damages of $5,000 or more” to be reported, in its Forms U4 or U5.
- LPL interpreted complaint did not need reporting, without a compensation request.
- Even if customer alleged sales practice violation that caused a loss of over $5,000.
- Or complaint as a whole made clear that the customer was seeking compensation.
AML Reporting
- LPL did not investigate attempts to get unauthorized access to electronic systems.
- The attempts should have resulted in a filing of suspicious activity reports (SARs).
- Failure stemmed from employee 'fraud case chart' giving inaccurate AML guidance.
- Firm provided AML analysts with flawed internal guidance regarding requirements.
- Incorrect guidance said firm was not required to investigate cyber-related events
if client did not incur financial loss or if the attempted intrusion was not completed. - Used incorrect $25,000 'harm threshold' to report, when should have used $5,000.
- As a result, LPL failed to investigate incidents and file over 400 SARs with FinCEN.
- Lacked a process to review AML referrals made by employees and representatives.
Sanctions
- Fine $2.75mn; FINRA considered LPL cooperation, undertaking to remedy failings.
