Broker-dealer works to enhance systems to get over latest compliance hurdle.
Sometime this quarter, LPL Financial LLC expects to settle with the Financial Industry Regulatory Authority Inc. a matter related to broker and adviser e-mail surveillance.
The broker-dealer's chief executive, Mark Casady, highlighted the e-mail surveillance issue yesterday in a call with Wall Street analysts who cover the company. The concern comes on the heels of two other recent settlements LPL has had with regulators, one over sales of nontraded real estate investment trusts and the other over the timely distribution of mutual fund prospectuses.
“Turning to the regulatory environment, we self-reported a matter related to e-mail surveillance and production to our principle regulator in 2011,” Mr. Casady said. “Since then, we have been working to implement enhancements to our supervisory systems and procedures related to these e-mail issues,” he said. The discussions with Finra also involve the resolution of potential rule violations, Mr. Casady said, with the belief that the company will settle the matter by the end of June.
LPL spokeswoman Betsy Weinberger was not immediately available for comment.
With more than 13,000 affiliated reps and advisers, LPL is the largest independent-contractor broker-dealer, but broker-dealers of all stripes have had varied levels of success in putting in place systems that properly supervise rep and adviser e-mails.
The e-mail supervision issue is the latest compliance hurdle for LPL.
In February, the Massachusetts Securities Division hit the company with a $500,000 administrative fine over the sale of nontraded REITs, which involved investors who bought shares of several different REITs in violation of state limitations, as well as the company's own rules and procedures. Massachusetts also required LPL to set aside $2 million for potential restitution to investors who bought shares of the REITs.
In its consent order with Massachusetts regulators, LPL admitted to a series of statements of fact around sale of the REITs but neither admitted nor denied allegations of insufficient training and oversight of sales of nontraded REITs, as well as alleged violations of securities laws.
And at the end of last year, Finra fined LPL for failing to maintain supervisory systems and written procedures to ensure the delivery of mutual fund prospectuses. The firm consented without admitting or denying to Finra's findings.
