FINRA Fines LPL Over Failure to Detect Harmful Wire Transfers to Clients

Posted on July 31st, 2023 at 1:13 PM
FINRA Fines LPL Over Failure to Detect Harmful Wire Transfers to Clients

From the Desk of Jim Eccleston at Eccleston Law.

The Financial Industry Regulatory Authority Inc. (FINRA) imposed a $3 million fine on LPL Financial for failing to oversee two financial advisors adequately. Those advisors had misappropriated $2.4 million from 13 clients, predominantly senior citizens.

According to the FINRA settlement, known as an Acceptance, Waiver, and Consent (“AWC”), from May 2018 to August 2020, the advisors "converted” client funds by having them write checks or make wire transfers of funds to various entities they controlled. One advisor used at least $550,000 in client funds to pay his personal and business expenses. The second advisor took almost $1.9 million from clients and used most of it to purchase real estate. 

Additionally, FINRA claimed that LPL failed to have a supervisory system reasonably designed to detect possible instances of signature forgery or falsification. During that period, nearly 50 LPL sales reps electronically signed another person's name on over 1,000 LPL documents, including on documents that were required books and records of the firm. 

According to AdvisorHub, the issue began when LPL informed the self-regulatory authority a few weeks before submitting the necessary industry documentation (a Form U-5) that it had fired one of its financial advisors for misappropriating customer funds.

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.


Related Attorneys: James J. Eccleston

Tags: Eccleston, Eccleston Law, FINRA, LPL

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