LPL Financial is potentially facing $50 million in fines from the Securities and Exchange Commission for failing to retain records and adequately supervise its employees’ use of off-channel cellphone and texting apps, the firm said in its annual report.
LPL said the fine is for “business-related electronic communications stored on personal devices or messaging platforms that we have not approved,” according to the report released last week.
The firm said it could pay $50 million to settle the matter but noted it has “not yet reached a settlement in principle with the SEC, and any settlement agreement remains subject to negotiation of civil monetary penalties and definitive documentation.”
The firm first disclosed the SEC’s investigation in its third-quarter report in October. The SEC’s proposed settlement was first reported by InvestmentNews on Friday.
San Diego-based LPL, a Fortune 500 firm with $1.3 trillion in total assets, did not respond to requests for comment.
The LPL probe is part of an ongoing SEC crackdown against undocumented business communications. Fifty-six firms have settled with the SEC for fines and penalties totaling $1.5 billion over their recordkeeping and supervisory failures when it comes to employees’ and managers’ use of off-channel communications such as WhatsApp.
In early February, 16 firms in the advisor and broker-dealer space, including Cambridge Investment Research, Lincoln Financial Advisor, Northwestern Mutual Investment Services and Northwestern Mutual Investment Management, agreed to pay $81 million in penalties to settle SEC allegations they were responsible for “pervasive company-wide failures” in failing to maintain and preserve personal texts regarding company business, including investment recommendations and broker-dealer business,” the SEC said.
By failing to preserve communications records, “some of the firms likely deprived the SEC of these off-channel communications in various SEC investigations,” the agency argued.
Such records “are essential to our ability to monitor and enforce compliance with the federal securities laws,” Gurbir S. Grewal, director of the SEC’s Division of Enforcement, noted.