FINRA Levies Heavy Fines Against LPL for Failure to Maintain and Supervise Emails

This week, LPL Financial LLC (“LPL”) was fined $7.5 million by The Financial Industry Regulatory Authority (“FINRA”) who cited LPL for thirty-five (35) separate email system failures.  FINRA asserted that these actions were a violation of the record keeping provisions of the federal securities laws and FINRA rules, as well as supervisory requirements under FINRA rules.  According to FINRA, these failures prevented LPL from accessing hundreds of millions of emails and reviewing tens of millions of other emails.  Additionally, LPL made material misstatements to FINRA during its investigation of the firm’s email failures (LPL was also ordered to establish a $1.5 million fund to compensate brokerage customer claimants potentially affected by its failure to produce email).

According to FINRA, the rapid growth of LPL and its failure to devote sufficient resources to update its email systems caused significant failures to those systems preventing LPL from capturing and retaining emails.  As a result, these emails were not subject to supervisory review and could not be produced upon request by FINRA investigators.  While LPL neither admitted nor denied the charges, Brad Bennett, the Executive Vice President and Chief of Enforcement for LPL, stated “as LPL grew, it did not expand its compliance and technology infrastructure; and as a result, LPL failed in its responsibility to provide complete responses to regulatory and other requests for emails. This case sends a strong message to firms to make sure your business does not outgrow your compliance systems.”

For further information on this, or other related topics, please contact us at info@jackolg.com or (619)298-2880.

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