On November 1, 2018, the Financial Regulatory Authority (“FINRA”) entered into a $2.75 million settlement with LPL Financial for supervisory failures related to the firm’s anti-money laundering (“AML”) program and customer complaint reporting practices. Most disturbing for financial consumers is LPL’s failure to disclose and report customer complaints. Customer complaints must be reported to FINRA within 30 days of a qualifying event.
Although LPL entered into the settlement without having to admit or deny any of FINRA’s findings, FINRA’s factual findings reflect badly on LPL’s supervisory practices which have already been the subject of numerous fines and regulatory inquiries. LPL recently settled a multi-state action agreeing to pay a fine of $499,000 to each participating jurisdiction that could ultimately reach $26,000,000.
Accurate tracking and reporting of customer complaints is critical to the supervision and monitoring of stockbrokers. According to FINRA, LPL avoided reporting customer complaints by narrowly interpreting the disclosure rules. As a result, customer complaints that should have been reported were not. This disciplinary information is also valuable to financial consumers and is publicly available through FINRA’s BrokerCheck system. BrokerCheck provides useful information that all financial consumers should use when evaluating and selecting a stockbroker or investment advisor.
The Bottom Line: Trust but verify. Use FINRA’s BrokerCheck service to see whether both your individual broker and their brokerage firm have a history of customer complaints, disciplinary actions or other “red flags.” Bear in mind that the system isn’t perfect and there may be undisclosed issues. If you suspect a serious problem over the handling of your account, consult with a securities lawyer that is experienced with FINRA matters.