LPL Financial on Thursday settled charges from the Securities and Exchange Commission that it violated anti-money laundering rules in connection to an unregistered investment adviser, with LPL paying more than $4.8 million to resolve this matter.
The unregistered advisers, Eugenio Garcia Jimenez, Jr., is not affiliated with LPL. Last December, the SEC charged Garcia, who is based in Orlando, Florida, for defrauding the Municipality of Mayagüez, Puerto Rico and misappropriating $7.1 million of taxpayer funds.
The Financial Industry Regulatory Authority Inc. three years ago fined LPL Financial $2.75 million for failing to list dozens of customer complaints against its brokers and for not filing hundreds of suspicious activity reports in its anti-money laundering program.
With more than 19,000 financial advisers, LPL is by far the largest independent brokerage firm in the industry and is expanding its employee and registered investment adviser channels, as well.
According to the SEC, Garcia opened an account at LPL in 2016 to further his scheme to defraud his client, the Municipality of Mayagüez. LPL did not verify certain identification documents before opening the account, although it was required to do so by its own procedures, according to the SEC.
Because LPL did not verify the purported customer address for the city’s municipal corporation provided by Garcia — which differed from its registered address — LPL could not comply with its obligation to accurately document its customer identification procedures, according to the SEC’s order.
And even though LPL was in possession of suspicious and conflicting customer account information, according to the SEC’s order, LPL received assets transferred from a previous firm and processed wire transfers resulting in Garcia’s further misappropriation of millions of dollars from the municipal corporation.
LPL did not admit or deny the SEC’s findings. In agreeing to settle the SEC’s charges, it will pay $4.1 million directly to the Mayagüez municipal corporation and a civil penalty of $750,000.
“We take our compliance and fraud governance obligations seriously and have made significant investments in the last few years to address the underlying issues related to this matter,” an LPL spokesperson wrote in an email. “We fully cooperated with our regulators and law enforcement to resolve and fully remediate this matter.”
At the end of last year, Finra hit LPL with a $6.5 million fine due to shortcomings in a variety of supervisory issues, ranging from record keeping to fingerprinting of non-registered employees and supervision of advisers’ consolidated reports.
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Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.