‘This LPL case is a grab bag,’ says industry attorney
The Financial Industry Regulatory Authority Inc. closed the year with substantial, multimillion-dollar penalties against two prominent firms, LPL Financial and Interactive Brokers.
On Dec. 27, LPL and Finra reached a $6.15 million settlement over the firm falling short on its supervision of thousands of transactions that its financial advisors and brokers completed from 2012 to 2019 with product sponsors such as a mutual fund company. In industry parlance, these transactions are known as “direct” business.
With more than 21,000 financial advisors using its platform, LPL agreed to pay a fine of $5.5 million and restitution of $651,000 to clients to settle the matter. LPL agreed to the settlement without admitting to or denying Finra’s findings.
Earlier, on Dec. 22, Finra and Interactive Brokers, which specializes in equities and options trading, agreed to a $3.5 million fine for failing to comply on best execution and supervision standards from 2014 through last year. Interactive Brokers reached the settlement without admitting to or denying Finra’s findings.
“Importantly, there are no allegations or findings by Finra in its settlement order that [Interactive Brokers’} smart order routing logic caused customer harm or failed to provide best execution to our customers,” a company spokesperson wrote in an email. “In fact, after testing and review, [Interactive Brokers] concluded that no changes needed to or should be made to the firm’s smart order routing logic as a result of Finra’s findings.”
Finra has a history of signing off on large fines and settlements as the end of the year approaches, and in some cases that decision may be driven by the firm it is dealing with.
“Sometimes, these settlements occur because it’s
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