FINRA Slaps LPL with Largest Fine Ever for E-mail Issues
According to a report in a recent edition of Investment News, the Financial Industry Regulatory Authority (FINRA) fined LPL Financial LLC $7.5 million for 35 significant e-mail system failures. representing the inadequate oversight of 28 million e-mails over a four-year period.
FINRA also ordered LPL to set up a $1.5 million fund to compensate brokerage customers who might have been affected by its inadequate e-mail oversight.
Spokeswoman for the agency, Michelle Ong, said this is the largest fine FINRA has imposed for an e-mail case.
The problems with LPL’s e-mails occurred from 2007 to 2013, and its systems failed more than at 35 times. LPL did not meet its obligations to capture e-mails, supervise reps and respond to requests from regulators.
According to FINRA, LPL failed to supervise 28 million “doing business as” e-mails sent and received by thousands of reps who were working as independent contractors, over a four-year period.
For their part, LPL neither admitted nor denied the charges. The company claims that in September 2011, it informed FINRA about issues related to the surveillance and retention of e-mails.
LPL also says it cooperated fully with FINRA, regrets its lapse of oversight, and has redesigned its e-mail systems and associated compliance policies and procedures.
The $7.5 million fine represents the second time this year that LPL has faced significant charges about compliance and oversight of its brokers and systems. In February, LPL was fined $500,000 and was ordered to set aside $2 million in restitution to Massachusetts investors related to the sale of non-traded real estate investment trusts (REITs) from LPL brokers.
LPL might be a victim of its own success. According to FINRA, the rapidly growing company, which has 13,000 registered reps and advisers, failed to devote sufficient resources to upgrade its complex e–mail system.
A securities law firm, Starr Austen Miller assists clients who have lost money because their stock brokers or advisors mismanaged their investments.