LPL Financial Holdings, one of the fastest-growing U.S. broker-dealers, has terminated employment agreements for its top executives but sweetened some of their benefits and paid two of them $500,000 apiece for giving up the contracts.

The disclosures were made in a regulatory filing on Wednesday that also reported a 32 percent jump in compensation to $6.14 million for longtime LPL Chairman and Chief Executive Mark Casady and a 21 percent hike to $3.12 million for President Robert Moore in 2013.

LPL's decision to eliminate employment contracts for Casady, Moore and Chief Financial Officer Dan Arnold as of February 24 had nothing to do with executive performance but was meant to align the firm "more closely with market practices" and eliminate compensation discrepancies with other executives, the proxy statement said.

For agreeing to undo their contracts, Arnold and Moore were each granted a special restricted stock grant valued at $500,000, according to the proxy.

The moves come as so-called independent broker-dealers such as LPL have been growing at breakneck speed even as they stumbled in supervising sales and compliance procedures.

The Financial Industry Regulatory Authority last May imposed $9 million in fines and customer restitution against LPL for pervasive technology lapses that prevented it from monitoring the emails of the almost 14,000 brokers who buy compliance, marketing and product services from the company.

On Wednesday, FINRA fined two other independent firms that compete with LPL - Triad Advisors and Securities America - $650,000 and $625,000 respectively for failing to supervise brokers who gave inaccurate account statements to customers.

LPL and the two firms settled without admitting the allegations, and LPL has since upgraded its technology and centralized compliance oversight for many of the single-office advisers who use its services.

The board of directors has not held the problems against Casady. In the preliminary proxy filing, the compensation committee said he had exceeded his performance target "as the company continues to transform its operating model and related expenses." LPL's adjusted earnings of $259 million last year were above its $250 million plan as advisers maintained productivity levels while expenses were kept in check, it said.

Severence Sweetened

An LPL spokeswoman said the 53-year-old Casady, who has been with LPL since 2003, did not receive the same stock grants as Arnold and Moore for releasing the company from its obligations under the employment contract because each executive employment agreement had different provisions. Last month, however, Casady received $3.1 million of new stock options that vest over three years as a performance bonus, down from the five-year vesting period LPL used to require for such bonuses.

LPL's board also rewrote the company's severance plan so executives get higher immediate compensation if they are terminated for reasons such as takeovers and lowered the age at which executives can retire with immediate access to deferred benefits from age 65 to age 55 if they have worked at LPL for 10 years.

As part of an effort to improve corporate governance, LPL said shareholders at the company's annual meeting on May 6 will consider an amendment to elect all directors annually rather than the current system of electing them on a staggered basis to three-year terms. It is among several changes made since two board members from private equity firm Hellman & Friedman resigned after the firm sold its shares in LPL last summer.

LPL shareholders also will be able to vote annually in an advisory capacity on approving the company's compensation practices rather than the former say-on-pay vote conducted every three years, the proxy said.

Though little known to the public, LPL's almost 14,000 brokers make it the fourth biggest broker-dealer in the U.S., slightly behind Bank of America's Merrill Lynch. It and other independent firms allow their brokers to keep much more of the fees and commission they earn from clients than traditional firms such as Merrill and Morgan Stanley, but the brokers at the independent firms pay for most of their overhead.

Though independent broker-dealers have traditionally focused on brokers who sell insurance and other products to middle-class Americans, LPL in recent years has aimed at hiring higher-end brokers with clients who have more than $250,000 to invest or who service corporate retirement plans.

Since it operates on thin profit margins because so much revenue is kept by brokers, LPL depends on continually growing its franchise to increase fees and commissions. The company missed its hiring target in 2013 due to "an industry-wide slowdown" in recruiting in the first half of the year, the proxy statement said, though it credited Casady with keeping broker production levels high.

In a presentation last week, however, the firm said recruiting in January and February remains below target due to "disruptive weather" conditions this winter.

LPL, which first offered shares to the public through a stock offering on Nasdaq in late 2010, was controlled until March by two private equity firms. A fund owned by one of the firms, TPG, continues to be its biggest shareholder owning 13.1 percent of its common stock.

Shares of LPL, which rose 66.5 percent over the past 12 months, rose 19 cents to $53.48 in Nasdaq trading on Wednesday.