LPL Financial (CRD#:6413) is one of the largest independent broker-dealers in the United States. With over 17,000 financial advisors across the country, LPL Financial services millions of investors. However, with significant size comes increased scrutiny. LPL Financial has repeatedly drawn the attention of regulators for compliance issues.
The firm has also generated numerous customer complaints over the years. Here’s an overview of some of the main factors contributing to LPL financial complaints and regulatory problems.
Violations of Industry Rules
LPL Financial has an extensive disclosure history with dozens of regulatory actions by authorities like FINRA and state regulators. The firm has been cited for violations of critical industry rules related to areas like recordkeeping, supervision, and disclosure. Just to show you, some examples of LPL Financial’s disclosure events include:
- Fined $9 million in 2014 for failing to provide sales charge waivers to retirement plan and charitable organization customers.
- Fined $10 million in 2016 for anti-money laundering supervision failures.
- Again Fined $6.5 million in 2017 for failures related to maintaining electronic records.
- Fined $11.7 million in 2018 for failing to supervise complex products like ETFs and variable annuities.
These fines indicate systematic supervisory failures at LPL Financial that have directly impacted customers.
Spotty Supervision of Far-Flung Advisors
With over 4,000 independent branch offices, LPL Financial has struggled to maintain strong supervision across its sprawling advisor network. OSJ managers are independent contractors responsible for supervising LPL advisors remotely. This decentralized model makes thorough oversight difficult.
Inadequate supervision has resulted in instances of advisors operating essentially unchecked and engaging in misconduct from unsuitable recommendations to outright fraud. Customers have felt the brunt of these compliance breakdowns.
High Rate of Customer Disputes
Given the supervisory issues and compliance problems, it’s not surprising that LPL Financial generates a high rate of customer disputes. While the vast majority of advisors are ethical, LPL financial complaints become more frequent when it comes to things like unsuitable investments, misrepresentation, excessive trading, and fraud.
Data shows LPL Financial generates arbitration claims at a rate surpassing competitor firms. Many cases involve career brokers with long complaint histories moving from firm to firm.
Putting Growth Above Compliance
For years, LPL Financial prioritized rapid expansion of its advisor force over adequate supervision and compliance. The firm acquired dozens of smaller IBDs and added thousands of new advisors. However, LPL failed to devote proper resources to oversight.
This growth-above-all strategy resulted in compliance deficiencies that harmed investors. Only recently has LPL Financial shifted its focus toward improving compliance and supervision.
LPL Financial Complaints: In Summary
LPL Financial’s regulatory issues and customer complaints stem largely from the firm emphasizing quick growth over proper oversight of its far-flung advisor network. Concentrating resources on compliance should help LPL Financial reduce complaints going forward. But the firm’s checkered history shows why investors must remain vigilant when choosing a financial advisor. If you have suffered losses in your LPL Financial account due to potential negligence or misconduct, don’t delay in contacting a qualified securities attorney.
The securities lawyers at The Law Offices of Robert Wayne Pearce, P.A. have four decades of experience helping investors recover investment losses caused by broker negligence. There are time limits for taking legal action, so call them to discuss your options.