In re LPL Financial LLC

 
 
 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 102224 / January 17, 2025 
INVESTMENT ADVISERS ACT OF 1940 
Release No. 6825 / January 17, 2025 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22422 
 
In the Matter of 
 
LPL Financial LLC  
 
Respondent. 
ORDER INSTITUTING ADMINISTRATIVE 
AND CEASE-AND-DESIST PROCEEDINGS, 
PURSUANT TO SECTIONS 15(b) AND 21C 
OF THE SECURITIES EXCHANGE ACT OF 
1934 AND SECTION 203(e) OF THE 
INVESTMENT ADVISERS ACT OF 1940, 
MAKING FINDINGS, AND IMPOSING 
REMEDIAL SANCTIONS AND A CEASE- 
AND-DESIST ORDER 
 
I. 
The Securities and Exchange Commission (“Commission”) deems it appropriate and in 
the public interest that public administrative and cease-and-desist proceedings be, and hereby 
are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 
(“Exchange Act”) and Section 203(e) of the Investment Advisers Act of 1940 (“Advisers Act”), 
against LPL Financial LLC (“LPL” or “Respondent”). 
II. 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Administrative and Cease-and Desist Proceedings Pursuant to Sections 15(b) and 21C of the 
Securities Exchange Act of 1934 and Section 203(e) of the Investment Advisers Act of 1940, 
Making Findings, and Imposing Remedial Sanctions and a Cease-and Desist Order (“Order”), as 
set forth below. 

 
2 
 
III. 
On the basis of this Order and Respondent’s Offer, the Commission finds that: 
Summary 
1. From at least May 2019 through December 2023 (the “Relevant Period”), LPL 
Financial LLC (“LPL”), a dually registered investment adviser and broker-dealer, failed to 
follow its own anti-money laundering (“AML”) policies and procedures (“AML Policies”) 
regarding its Customer Identification Program (“CIP”) and ongoing customer due diligence 
obligations. 
2. Among other problems, LPL failed to properly verify new accounts; failed to 
timely close accounts that did not pass its CIP screening measures; and failed to close or restrict 
certain accounts, such as cannabis-related and foreign accounts, that were prohibited under 
LPL’s AML Policies. 
3. As a result of these failures, LPL willfully violated its obligations under Section 
17(a) of the Exchange Act and Rule 17a-8 thereunder, which require broker-dealers to comply 
with reporting, recordkeeping, and record retention requirements in regulations implemented 
under the Bank Secrecy Act, including the customer identification program rule (31 C.F.R. § 
1023.220, the “CIP Rule”) and the ongoing customer due diligence requirements (31 C.F.R. § 
1023.210(b)(5), “Ongoing CDD”) of the AML program rule (31 C.F.R. § 1023.210, the “AML 
Program Rule”). 
Respondent 
4. LPL Financial LLC, a California limited liability company with its principal 
office in Fort Mill, South Carolina, has been registered with the Commission as a broker-dealer 
since 1973 and an investment adviser since 1975. In 2021, LPL was subject to a settled Order 
with the Commission, which found LPL to have willfully violated Section 17(a) of the Exchange 
Act and Rule 17a-8 thereunder, and which ordered LPL to cease and desist from committing or 
causing any violations, and any future violations, of Section 17(a) and Rule 17a-8 of the 
Exchange Act; imposed a $750,000 penalty; and deemed disgorgement satisfied by LPL’s 
payment of $3.3 million plus interest in a related private action. In May 2015 and October 2018, 
LPL was also subject to two FINRA actions involving certain AML program failures. 
Background 
5. On April 29, 2003, the Commission and the Treasury Department jointly issued 
the CIP Rule. The CIP Rule is designed to prevent use of the securities industry for money 
laundering and terrorist financing and requires broker-dealers to make and keep records related 
to the identification of its customers and to “establish, document, and maintain a written CIP 
appropriate for the broker-dealer’s size and business...” 31 C.F.R. § 1023.220(a)(1). As part of 
its written CIP, a broker-dealer must generally collect, at a minimum, basic information about 
each of its customers, including each customer’s name, date of birth, address, and identification 
number. 31 C.F.R. § 1023.220(a)(2)(i). 

 
3 
 
6. The CIP must include risk-based procedures for verifying the identity of each 
customer, to the extent reasonable and practicable, to enable the broker-dealer to form a 
reasonable belief that it knows the true identity of each customer. 31 C.F.R. § 1023.220(a)(2). 
7.  The broker-dealer’s CIP also must include procedures for making and 
maintaining records of the customer’s identifying information and its verification of the 
customer’s identity. 31 C.F.R. § 1023.220(a)(3). 
8. Under the Ongoing CDD requirements of the AML Program Rule for broker-
dealers, broker-dealers must adopt “[a]ppropriate risk-based procedures for conducting ongoing 
customer due diligence,” which include (but are not limited to) “[u]nderstanding the nature and 
purpose of customer relationships for the purpose of developing a customer risk profile” and 
“[c]onducting ongoing monitoring to identify and report suspicious transactions and, on a risk 
basis, to maintain and update customer information.” 31 C.F.R. § 1023.210(b)(5). 
9. Rule 17a-8, which was promulgated under Section 17(a) of the Exchange Act, 
requires broker-dealers to comply with the reporting, recordkeeping and record retention 
requirements in regulations implemented under the Bank Secrecy Act, including the CIP Rule 
and the Ongoing CDD requirements of the AML Program Rule. 
Facts 
10. According to the 2023 Form 10-K of LPL Financial Holdings Inc., the parent 
company of LPL, LPL and its affiliates serve the advisor-mediated marketplace as the nation’s 
largest independent broker-dealer, an investment advisory firm, and a custodian. LPL is a broker-
dealer that clears and settles customer transactions. As of November 2024, LPL had 
approximately 9,000 employees. As of September 2024, LPL had approximately 2.2 million 
customer brokerage accounts holding approximately $307 billion in value. 
A. LPL’s Policies and Procedures for Identification and Verification of Account 
Holders 
11. During the Relevant Period, when a customer opened a new brokerage account, 
LPL’s AML Policies required LPL to collect certain information, including the account holder’s  
a) full name; b) mailing address and residence address (or principal place of business for persons 
other than an individual); c) date of birth (for individuals); d) country of citizenship; and e) social 
security number or tax identification number (or, in the case of a non-resident alien, a passport 
number and the name of the country that issued the passport). 
12. LPL sent the information that it obtained from customers to a third-party vendor 
to conduct an overnight screening process to help LPL determine whether it had obtained 
information sufficient to support a reasonable belief that it knew the customer’s true identity. 
The vendor’s screening provided LPL with a Customer Verification Index, which was based on 
the vendor’s ability to independently confirm the customer’s first and last name, address, date of 
birth, and social security number or tax identification number. The screening also flagged 
additional risk factors, such as whether the social security number had been reported as deceased 
or the address matched a prison address. If the screening failed to confirm key elements of the 

 
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customer’s identity, or if it flagged certain risk factors, the account was deemed by LPL not to 
have passed CIP. 
13. Throughout the Relevant Period, account restrictions were placed on accounts 
with unresolved CIP issues, as required by LPL’s AML Policies. These restrictions included 
asset freezes, which prevented account holders from taking assets out of the account, and trading 
restrictions, which prevented account holders from trading in the account. 
14. From at least May 2019 to December 17, 2020, LPL’s AML Policies did not 
specify a timeframe for the account closure processes after a customer failed CIP verification. 
On December 18, 2020, LPL updated its AML Policies to specify that for accounts that had not 
passed CIP, if verification was still unsuccessful after 60 days, the account closure process 
should begin. 
15. Throughout the Relevant Period, after an account was restricted, LPL’s registered 
representatives could seek to resolve the CIP issues on behalf of the account holders. As part of 
this process, a registered representative could call the LPL service team, which was part of the 
Service, Trading, and Operations Department, to request that a service team member lift the 
restrictions on the account. Upon receiving this call from the registered representative, the 
service team member was supposed to triage the issue, perform research, and communicate to the 
registered representative the outstanding documentation needed to try to resolve the CIP failure. 
In practice, however, this restriction-lifting process was in numerous cases conducted while the 
service personnel team member was still on the call with the registered representative, lifting the 
restrictions without the CIP failure being resolved. 
16. Several times during the Relevant Period, LPL’s Internal Audit flagged LPL’s 
restriction-lifting process as problematic. For example, a May 2019 email described a prior 
finding by LPL’s Internal Audit that the current process “allows placing, lifting or editing of 
restrictions with no reporting or audit trail. There is not an effective way to capture reasons for 
restrictions being placed or modified and anyone with access can modify restrictions freely with 
no second check review. This can result in restrictions being removed in error allowing for 
unauthorized account activity.” Nevertheless, the finding remained on the list of “past due” 
remediation items as late as February 1, 2022. 
B. LPL’s Failure to Follow Its AML Policies Regarding CIP 
17. The CIP Rule requires LPL to “include procedures for making and maintaining a 
record of all information obtained under procedures implementing [LPL’s CIP].” 31 C.F.R. § 
1023.220(a)(3). The records are required to be retained for five years. 31 C.F.R. § 
1023.220(a)(3)(ii). 
18. LPL’s AML Policies did not describe what CIP information should be retained or 
how to retain the screenings performed. Furthermore, there was not a consistent way to track the 
CIP information received by the service team when LPL registered representatives contacted 
them. Instead, service personnel used ad hoc methods to record CIP information received from 
the customers or the reasons why restrictions had been lifted. This information, when it was 
recorded, was typed by the service personnel into an internal LPL system connected with the 

 
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account. The notes were not maintained in any back-end system, and there were instances where 
the notes taken by the service personnel were vague or incomplete. The lack of a consistent 
approach led to failures to retain records as required by LPL’s AML Policies. 
19. The CIP Rule further requires broker-dealers to adopt “procedures for responding 
to circumstances in which the broker-dealer cannot form a reasonable belief that it knows the 
true identity of a customer,” including a description of “[w]hen the broker-dealer should close an 
account after attempts to verify a customer’s identity fail.” 31 C.F.R. § 1023.220(a)(2)(iii)(C). 
20. As noted above, from at least May 2019 to December 17, 2020, LPL’s AML 
Policies stated that an account that failed CIP should be closed; however, LPL’s AML Policies 
did not provide instructions for when or how this should occur. As a result, during this time 
period, accounts that had not passed CIP were not closed in violation of LPL’s AML Policies. 
On December 18, 2020, LPL revised its AML Policies to specify that activity would be restricted 
on accounts that had not passed CIP. LPL personnel had 60 days to form a reasonable belief of 
the true identity of the account holder. If LPL collected information sufficient to establish 
reasonable belief, service personnel could lift the restrictions. After 60 days, if LPL still did not 
have information sufficient to form a reasonable belief of the true identity of the account holder, 
the account closure process should begin. 
21. In practice, even after revising the AML Policies, LPL did not have a process for 
initiating the account closure process for accounts that still had insufficient information about the 
identity of the account holders after 60 days. This led to thousands of accounts that had failed 
LPL’s CIP but remained open after 60 days, in violation of LPL’s AML Policies. For example, 
on October 12, 2022, LPL identified 7,356 accounts that had not passed CIP but were allowed to 
remain open past 60 days, despite the AML Policies’ requirement to close such accounts after a 
60-day period. 
22. LPL’s AML Policies required LPL to obtain information sufficient to form a 
reasonable belief of the true identity of the account holder before lifting restrictions on the 
account.  
23. In a review of its practices, LPL found that LPL’s service personnel lacked proper 
knowledge and training regarding CIP issues. In addition, service personnel often did not have 
the most up-to-date resource documents available, and thus their knowledge of LPL’s CIP policy 
requirements was outdated. Moreover, there were limited oversight procedures for reviewing 
CIP-related restrictions to determine that the underlying CIP issue was truly resolved. As a 
result, LPL service personnel lifted restrictions despite not having adequately resolved the CIP 
issues for the account. 
24. Because of LPL’s CIP recordkeeping failures described above, LPL could not 
determine how many accounts had restrictions that were lifted improperly. However, during the 
Relevant Period, LPL conducted monthly CIP AML assurance reviews, which analyzed a 
sampling of restrictions that had been lifted. These monthly reviews routinely found instances 
where restrictions had been removed from accounts even though CIP risk factors had not been 
cleared. Despite the issues discovered in these reviews, LPL failed to address the underlying 
problems with the company’s CIP. 

 
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25. As a result of the above, and in violation of its AML Policies, LPL failed to 
document accurately its CIP procedures. 
C. LPL’s Failure to Follow Its AML Policies Regarding the Closure of Prohibited 
Accounts 
26. As further described below, LPL failed to close certain higher-risk accounts that 
its AML Policies had deemed prohibited.  
27. As early as May 2019, LPL’s AML Policies prohibited LPL from “doing business 
with any person or entity involved with marijuana [cannabis] production, distribution or other 
ancillary operations.” The policy applied to “new accounts established for such entities or 
persons” and noted that “[e]xisting accounts that are discovered after the fact to be involved in 
such activities will be addressed on a case by case basis.” 
28. Despite the policy prohibiting doing business with any person or entity involved, 
either on a direct or ancillary basis, with cannabis production or distribution, LPL nevertheless 
permitted numerous cannabis-related accounts to be opened and remain open for years. As of 
February 2023, approximately 1,400 accounts holding approximately $350 million in assets were 
deemed inconsistent with LPL’s AML Policies regarding cannabis-related businesses. 
29. Since at least May 2019, LPL’s AML Policies also prohibited opening or 
maintaining accounts with customers in certain foreign countries and directed employees to 
LPL’s Foreign Accounts Policy for further guidance. The Foreign Accounts Policy, incorporated 
by reference into LPL’s AML Policies, significantly limited the circumstances under which 
accounts in foreign jurisdictions could be opened or serviced, absent a formal exception. 
30. The Foreign Accounts Policy designated only one country, Mexico, as an “open 
jurisdiction” where LPL financial professionals were permitted to solicit new business as well as 
service accounts. The policy provided a list of countries designated as “maintain jurisdictions” 
where existing accounts were allowed to be serviced, but financial professionals were prohibited 
from soliciting or establishing new business. All other countries were “closed jurisdictions” 
where accounts could not be opened or serviced, absent a formal exception. 
31. In violation of its Foreign Accounts Policy, LPL opened and serviced accounts in 
“closed jurisdictions” and allowed numerous accounts to be opened in “maintain jurisdictions.” 
32. As early as 2019, LPL was aware of these violations of its Foreign Accounts 
Policy. LPL’s Internal Audit issued a January 13, 2020 report with an overall rating of “Major 
Improvements Needed” regarding LPL’s supervision of foreign accounts. The report noted that 
LPL “lacks the ability to monitor and manage the risk(s) associated with each Foreign Account, 
as well as the ability to implement an ongoing monitoring process” and that a “formal, 
standardized process for granting exceptions” to the Foreign Accounts Policy [had] not been 
established, documented and communicated.” Nevertheless, in spite of these risks, “LPL 
continue[d] to service over 4000 [foreign accounts for customers residing] in 84 countries around 
the world, of which over 90% of U.S. Expatriates reside in Closed Jurisdictions.” 

 
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33. Despite repeated internal audits and assessments noting the failures these areas, 
LPL continued to service cannabis accounts and foreign accounts in violation of LPL’s AML 
Policies and Foreign Accounts Policy regarding these accounts.  
34. As a result of the above, and in violation of LPL’s AML Policies and Foreign 
Accounts Policy, LPL failed to document accurately its Ongoing CDD procedures. 
Violations 
35. As a result of the conduct described above, LPL willfully
1
 violated Section 17(a) 
of the Exchange Act and Rule 17a-8 thereunder. 
LPL’s Remedial Efforts 
36. In determining to accept the Offer, the Commission considered remedial acts 
undertaken by LPL and cooperation afforded the Commission staff. 
37. In early 2023, after the Commission staff began its investigation and contacted 
LPL regarding these issues, LPL retained a third-party compliance consultant (“Compliance 
Consultant”) to conduct a review and assessment of its policies, procedures, and practices related 
to CIP and customer due diligence, and to provide findings and recommendations to LPL (the 
“Compliance Review”). The Compliance Consultant identified numerous issues with the relevant 
policies, procedures, and practices related to LPL’s CIP and customer due diligence (the 
“Findings”) and provided recommendations to LPL for each. LPL has taken steps to execute the 
Compliance Consultant’s recommendations. 
38. LPL has also made changes to its leadership and organization since the start of the 
Commission’s investigation, including the appointment of new personnel in key legal and 
compliance roles. LPL has also increased resources allocated to its compliance program, 
including specifically in relation to its AML program. 
Undertakings 
Respondent has undertaken to: 
39. Continue its retention of the Compliance Consultant to conduct a comprehensive 
review of LPL’s CIP and customer due diligence (“CDD”) policies and procedures. LPL shall 
exclusively bear all costs, including compensation and expenses, associated with the retention of 
the Compliance Consultant. 
40. LPL shall require that, within forty-five (45) days after completion of the 
comprehensive review of LPL’s CIP and CDD policies and procedures, the Compliance 
Consultant shall submit a detailed written report of its findings (the “Interim Report”) to LPL 
and the Commission staff.  LPL shall require that the Interim Report include a description of the 
                                                 
1
 “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and Section 203(e) of the 
Advisers Act, “‘means no more than that the person charged with the duty knows what he is doing.’”  See Wonsover 
v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). 

 
8 
 
review performed, the names of the individuals who performed the review, the conclusions 
reached, and the Compliance Consultant’s recommendations for changes in or improvements to 
LPL’s CIP and CDD policies and procedures, and a summary of the plan prepared by LPL for 
implementing the recommended changes in or improvements to LPL’s policies and procedures.  
If the Compliance Consultant’s December 2023 report meets the requirements outlined in 
paragraphs 39 and 40, it may be re-submitted as the Interim Report.  In this event, LPL shall 
require that the Interim Report be re-submitted within forty-five (45) days after entry of this 
Order. 
41. LPL shall adopt all recommendations contained in the Interim Report within two-
hundred (200) days of the date of submission of the Interim Report; provided, however, that 
within thirty (30) days after the date of submission of the Interim Report, LPL shall in writing 
advise the Compliance Consultant and the Commission staff of any recommendations that LPL 
considers to be unduly burdensome, impractical, or inappropriate.  With respect to any 
recommendation LPL considers to be unduly burdensome, impractical, or inappropriate, LPL 
need not adopt that recommendation at that time but shall propose in writing an alternative 
policy, procedure, or system designed to achieve the same objective or purpose. 
42. As to any recommendation in the Interim Report on which LPL and the 
Compliance Consultant do not agree, LPL shall attempt in good faith to reach an agreement with 
the Compliance Consultant on an alternative proposal within sixty (60) days after the date of 
submission of the Interim Report. Within fifteen (15) days after the conclusion of the discussion 
and evaluation by LPL and the Compliance Consultant, LPL shall require that the Compliance 
Consultant inform LPL and the Commission staff in writing of the Compliance Consultant’s 
final determination concerning any recommendation objected to by LPL. LPL shall abide by the 
determinations of the Compliance Consultant and, within one hundred forty (140) days after final 
agreement between LPL and the Compliance Consultant or final determination of the 
Compliance Consultant, whichever occurs first, LPL shall adopt and implement all of the 
recommendations that the Compliance Consultant deems appropriate.  
43. One-Year Evaluation:  LPL shall require the Compliance Consultant to assess 
LPL’s CIP and CDD programs, commencing one year after submission of the Interim Report 
required by Paragraph 40 above. LPL shall require this review to evaluate LPL’s performance in 
its CIP and CDD programs.  Within 90 days after initiating this review, LPL shall require the 
Compliance Consultant to submit a report (the “One-Year Report”) to LPL and the Commission 
staff and shall ensure that the One-Year Report includes an updated assessment of LPL’s policies 
and procedures with regard to its CIP and CDD programs, including but not limited to any 
changes implemented in connection with the Interim Report. LPL shall require that the One-Year 
Report include a description of the review performed, the names of the individuals who 
performed the review, the conclusions reached, the Compliance Consultant’s recommendations 
for changes in or improvements to LPL’s CIP and CDD policies and procedures, and a summary 
of the plan prepared by LPL for implementing the recommended changes in or improvements to 
LPL’s policies and procedures.   
44. LPL shall adopt all recommendations contained in the One-Year Report within 
one hundred eighty (180) days of the date of the One-Year Report; provided, however, that 
within thirty (30) days after the date of the Report, LPL shall in writing advise the Compliance 

 
9 
 
Consultant and the Commission staff of any recommendations that LPL considers to be unduly 
burdensome, impractical, or inappropriate. With respect to any recommendation LPL considers 
to be unduly burdensome, impractical, or inappropriate, LPL need not adopt that 
recommendation at that time but shall propose in writing an alternative policy, procedure, or 
system designed to achieve the same objective or purpose. 
45. As to any recommendation in the One-Year Report on which LPL and the 
Compliance Consultant do not agree, LPL shall attempt in good faith to reach an agreement with 
the Compliance Consultant on an alternative proposal within sixty (60) days after the date of the 
One-Year Report. Within fifteen (15) days after the conclusion of the discussion and evaluation 
by LPL and the Compliance Consultant, LPL shall require that the Compliance Consultant 
inform LPL and the Commission staff in writing of the Compliance Consultant’s final 
determination concerning any recommendation objected to by LPL. LPL shall abide by the 
determinations of the Compliance Consultant and, within one hundred twenty (120) days after 
final agreement between LPL and the Compliance Consultant or final determination of the 
Compliance Consultant, whichever occurs first, LPL shall adopt and implement all of the 
recommendations that the Compliance Consultant deems appropriate.  
46. Within thirty (30) days of LPL’s adoption of all the recommendations in the One-
Year Report that the Compliance Consultant deems appropriate, LPL shall require the 
Compliance Consultant to submit a written final report to LPL and the Commission staff (the 
“Final Report”). The Final Report will (1) describe how LPL has adopted and implemented the 
Compliance Consultant’s recommendations, if any, from the Interim Report and One-Year 
Report; (2) describe details of any areas where LPL has not adequately adopted and implemented 
its recommendations, if any; and (3) include a statement from the Compliance Consultant on 
whether there are remaining gaps between LPL’s CIP and CDD policies, and LPL’s 
implementation thereof, and applicable federal securities laws related to CIP and CDD programs 
that have been identified. 
47. LPL shall cooperate fully with the Compliance Consultant and shall provide the 
Compliance Consultant with access to its files, books, records, and personnel as reasonably 
requested by the Compliance Consultant. For the period of the engagement, LPL shall not have 
the authority to terminate the Compliance Consultant or substitute another compliance consultant 
for the Compliance Consultant without the prior written approval of the Commission staff. 
48. The reports by the Compliance Consultant will likely include confidential 
financial, proprietary, competitive business or commercial information. Public disclosure of the 
reports could discourage cooperation, impede pending or potential government investigations, or 
undermine the objectives of the reporting requirement. For these reasons, among others, the 
reports and the contents thereof are intended to remain and shall remain non-public, except (1) 
pursuant to court order, (2) as agreed to by the parties in writing, (3) to the extent that the 
Commission determines in its sole discretion that disclosure would be in furtherance of the 
Commission’s discharge of its duties and responsibilities, or (4) as otherwise required by law.  
49. LPL undertakes to certify, in writing, compliance with the undertakings set forth 
above. The certification shall identify the undertakings, provide written evidence of compliance 
in the form of a narrative, and be supported by exhibits sufficient to demonstrate compliance. 

 
10 
 
The Commission staff may make reasonable requests for further evidence of compliance, and 
Respondent agrees to provide such evidence. The certification and supporting material shall be 
submitted to Stacy Bogert, Associate Director, Division of Enforcement, Securities and 
Exchange Commission, 100 F Street NE, Washington, D.C. 20549, with a copy to the Office of 
Chief Counsel of the Enforcement Division, no later than sixty (60) days from the date of the 
completion of the undertakings.  
50. LPL shall preserve for a period of not less than six (6) years from the end of the 
fiscal year last used, the first two years in an easily accessible place, any record of its compliance 
with the undertakings set forth herein.  
51. For good cause shown, the Commission staff may extend any of the procedural 
dates relating to the undertakings. Deadlines for procedural dates shall be counted in calendar 
days, except that if the last day falls on a weekend or federal holiday, the next business day shall 
be considered to be the last day.   
IV. 
In view of the foregoing, the Commission deems it appropriate and in the public interest 
to impose the sanctions agreed to in Respondent LPL’s Offer. 
Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Section 203(e) 
of the Advisers Act, it is hereby ORDERED that: 
A. Respondent LPL cease and desist from committing or causing any violations and 
any future violations of Section 17(a) of the Securities Exchange Act and Rule 
17a-8 thereunder. 
B. Respondent LPL is censured. 
C. Respondent LPL shall, within 14 days of the entry of this Order, pay a civil 
money penalty of $18,000,000 to the Securities and Exchange Commission for 
transfer to the general fund of the United States Treasury, subject to Exchange 
Act Section 21F(g)(3). If timely payment is not made, additional interest shall 
accrue pursuant to 31 U.S.C. §3717. 
Payment must be made in one of the following ways: 
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request; 
(2) Respondent may make direct payment from a bank account via Pay.gov through 
the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 
(3) Respondent may pay by certified check, bank cashier’s check, or United States 
postal money order, made payable to the Securities and Exchange Commission 
and hand-delivered or mailed to: 

 
11 
 
Enterprise Services Center 
Accounts Receivable Branch  
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
Payments by check or money order must be accompanied by a cover letter identifying 
LPL as a Respondent in these proceedings, and the file number of these proceedings; a copy of 
the cover letter and check or money order must be sent to Stacy Bogert, Associate Director, 
Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 
20549. 
D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 
be treated as penalties paid to the government for all purposes, including all tax 
purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees 
that in any Related Investor Action, it shall not argue that it is entitled to, nor shall 
it benefit by, offset or reduction of any award of compensatory damages by the 
amount of any part of Respondent’s payment of a civil penalty in this action 
(“Penalty Offset”). If the court in any Related Investor Action grants such a 
Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a 
final order granting the Penalty Offset, notify the Commission's counsel in this 
action and pay the amount of the Penalty Offset to the Securities and Exchange 
Commission. Such a payment shall not be deemed an additional civil penalty and 
shall not be deemed to change the amount of the civil penalty imposed in this 
proceeding. For purposes of this paragraph, a “Related Investor Action” means a 
private damages action brought against Respondent by or on behalf of one or 
more investors based on substantially the same facts as alleged in the Order 
instituted by the Commission in this proceeding. 
E. Respondent shall comply with the undertakings described in paragraphs 39 – 51 
above. 
 
By the Commission. 
Vanessa A. Countryman  
Secretary 

UNITED STATES OF AMERICA 

Before the 

SECURITIES AND EXCHANGE COMMISSION 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 102224 / January 17, 2025 

INVESTMENT ADVISERS ACT OF 1940 

Release No. 6825 / January 17, 2025 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22422 

 

In the Matter of 

 

LPL Financial LLC  

 

Respondent. 

ORDER INSTITUTING ADMINISTRATIVE 

AND CEASE-AND-DESIST PROCEEDINGS, 

PURSUANT TO SECTIONS 15(b) AND 21C 

OF THE SECURITIES EXCHANGE ACT OF 

1934 AND SECTION 203(e) OF THE 

INVESTMENT ADVISERS ACT OF 1940, 

MAKING FINDINGS, AND IMPOSING 

REMEDIAL SANCTIONS AND A CEASE- 

AND-DESIST ORDER 

 

I. 

The Securities and Exchange Commission (“Commission”) deems it appropriate and in 

the public interest that public administrative and cease-and-desist proceedings be, and hereby 

are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 

(“Exchange Act”) and Section 203(e) of the Investment Advisers Act of 1940 (“Advisers Act”), 

against LPL Financial LLC (“LPL” or “Respondent”). 

II. 

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the 

findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Administrative and Cease-and Desist Proceedings Pursuant to Sections 15(b) and 21C of the 

Securities Exchange Act of 1934 and Section 203(e) of the Investment Advisers Act of 1940, 

Making Findings, and Imposing Remedial Sanctions and a Cease-and Desist Order (“Order”), as 

set forth below. 



 

2 

 

III. 

On the basis of this Order and Respondent’s Offer, the Commission finds that: 

Summary 

1. From at least May 2019 through December 2023 (the “Relevant Period”), LPL 

Financial LLC (“LPL”), a dually registered investment adviser and broker-dealer, failed to 

follow its own anti-money laundering (“AML”) policies and procedures (“AML Policies”) 

regarding its Customer Identification Program (“CIP”) and ongoing customer due diligence 

obligations. 

2. Among other problems, LPL failed to properly verify new accounts; failed to 

timely close accounts that did not pass its CIP screening measures; and failed to close or restrict 

certain accounts, such as cannabis-related and foreign accounts, that were prohibited under 

LPL’s AML Policies. 

3. As a result of these failures, LPL willfully violated its obligations under Section 

17(a) of the Exchange Act and Rule 17a-8 thereunder, which require broker-dealers to comply 

with reporting, recordkeeping, and record retention requirements in regulations implemented 

under the Bank Secrecy Act, including the customer identification program rule (31 C.F.R. § 

1023.220, the “CIP Rule”) and the ongoing customer due diligence requirements (31 C.F.R. § 

1023.210(b)(5), “Ongoing CDD”) of the AML program rule (31 C.F.R. § 1023.210, the “AML 

Program Rule”). 

Respondent 

4. LPL Financial LLC, a California limited liability company with its principal 

office in Fort Mill, South Carolina, has been registered with the Commission as a broker-dealer 

since 1973 and an investment adviser since 1975. In 2021, LPL was subject to a settled Order 

with the Commission, which found LPL to have willfully violated Section 17(a) of the Exchange 

Act and Rule 17a-8 thereunder, and which ordered LPL to cease and desist from committing or 

causing any violations, and any future violations, of Section 17(a) and Rule 17a-8 of the 

Exchange Act; imposed a $750,000 penalty; and deemed disgorgement satisfied by LPL’s 

payment of $3.3 million plus interest in a related private action. In May 2015 and October 2018, 

LPL was also subject to two FINRA actions involving certain AML program failures. 

Background 

5. On April 29, 2003, the Commission and the Treasury Department jointly issued 

the CIP Rule. The CIP Rule is designed to prevent use of the securities industry for money 

laundering and terrorist financing and requires broker-dealers to make and keep records related 

to the identification of its customers and to “establish, document, and maintain a written CIP 

appropriate for the broker-dealer’s size and business…” 31 C.F.R. § 1023.220(a)(1). As part of 

its written CIP, a broker-dealer must generally collect, at a minimum, basic information about 

each of its customers, including each customer’s name, date of birth, address, and identification 

number. 31 C.F.R. § 1023.220(a)(2)(i). 



 

3 

 

6. The CIP must include risk-based procedures for verifying the identity of each 

customer, to the extent reasonable and practicable, to enable the broker-dealer to form a 

reasonable belief that it knows the true identity of each customer. 31 C.F.R. § 1023.220(a)(2). 

7.  The broker-dealer’s CIP also must include procedures for making and 

maintaining records of the customer’s identifying information and its verification of the 

customer’s identity. 31 C.F.R. § 1023.220(a)(3). 

8. Under the Ongoing CDD requirements of the AML Program Rule for broker-

dealers, broker-dealers must adopt “[a]ppropriate risk-based procedures for conducting ongoing 

customer due diligence,” which include (but are not limited to) “[u]nderstanding the nature and 

purpose of customer relationships for the purpose of developing a customer risk profile” and 

“[c]onducting ongoing monitoring to identify and report suspicious transactions and, on a risk 

basis, to maintain and update customer information.” 31 C.F.R. § 1023.210(b)(5). 

9. Rule 17a-8, which was promulgated under Section 17(a) of the Exchange Act, 

requires broker-dealers to comply with the reporting, recordkeeping and record retention 

requirements in regulations implemented under the Bank Secrecy Act, including the CIP Rule 

and the Ongoing CDD requirements of the AML Program Rule. 

Facts 

10. According to the 2023 Form 10-K of LPL Financial Holdings Inc., the parent 

company of LPL, LPL and its affiliates serve the advisor-mediated marketplace as the nation’s 

largest independent broker-dealer, an investment advisory firm, and a custodian. LPL is a broker-

dealer that clears and settles customer transactions. As of November 2024, LPL had 

approximately 9,000 employees. As of September 2024, LPL had approximately 2.2 million 

customer brokerage accounts holding approximately $307 billion in value. 

A. LPL’s Policies and Procedures for Identification and Verification of Account 

Holders 

11. During the Relevant Period, when a customer opened a new brokerage account, 

LPL’s AML Policies required LPL to collect certain information, including the account holder’s  

a) full name; b) mailing address and residence address (or principal place of business for persons 

other than an individual); c) date of birth (for individuals); d) country of citizenship; and e) social 

security number or tax identification number (or, in the case of a non-resident alien, a passport 

number and the name of the country that issued the passport). 

12. LPL sent the information that it obtained from customers to a third-party vendor 

to conduct an overnight screening process to help LPL determine whether it had obtained 

information sufficient to support a reasonable belief that it knew the customer’s true identity. 

The vendor’s screening provided LPL with a Customer Verification Index, which was based on 

the vendor’s ability to independently confirm the customer’s first and last name, address, date of 

birth, and social security number or tax identification number. The screening also flagged 

additional risk factors, such as whether the social security number had been reported as deceased 

or the address matched a prison address. If the screening failed to confirm key elements of the 



 

4 

 

customer’s identity, or if it flagged certain risk factors, the account was deemed by LPL not to 

have passed CIP. 

13. Throughout the Relevant Period, account restrictions were placed on accounts 

with unresolved CIP issues, as required by LPL’s AML Policies. These restrictions included 

asset freezes, which prevented account holders from taking assets out of the account, and trading 

restrictions, which prevented account holders from trading in the account. 

14. From at least May 2019 to December 17, 2020, LPL’s AML Policies did not 

specify a timeframe for the account closure processes after a customer failed CIP verification. 

On December 18, 2020, LPL updated its AML Policies to specify that for accounts that had not 

passed CIP, if verification was still unsuccessful after 60 days, the account closure process 

should begin. 

15. Throughout the Relevant Period, after an account was restricted, LPL’s registered 

representatives could seek to resolve the CIP issues on behalf of the account holders. As part of 

this process, a registered representative could call the LPL service team, which was part of the 

Service, Trading, and Operations Department, to request that a service team member lift the 

restrictions on the account. Upon receiving this call from the registered representative, the 

service team member was supposed to triage the issue, perform research, and communicate to the 

registered representative the outstanding documentation needed to try to resolve the CIP failure. 

In practice, however, this restriction-lifting process was in numerous cases conducted while the 

service personnel team member was still on the call with the registered representative, lifting the 

restrictions without the CIP failure being resolved. 

16. Several times during the Relevant Period, LPL’s Internal Audit flagged LPL’s 

restriction-lifting process as problematic. For example, a May 2019 email described a prior 

finding by LPL’s Internal Audit that the current process “allows placing, lifting or editing of 

restrictions with no reporting or audit trail. There is not an effective way to capture reasons for 

restrictions being placed or modified and anyone with access can modify restrictions freely with 

no second check review. This can result in restrictions being removed in error allowing for 

unauthorized account activity.” Nevertheless, the finding remained on the list of “past due” 

remediation items as late as February 1, 2022. 

B. LPL’s Failure to Follow Its AML Policies Regarding CIP 

17. The CIP Rule requires LPL to “include procedures for making and maintaining a 

record of all information obtained under procedures implementing [LPL’s CIP].” 31 C.F.R. § 

1023.220(a)(3). The records are required to be retained for five years. 31 C.F.R. § 

1023.220(a)(3)(ii). 

18. LPL’s AML Policies did not describe what CIP information should be retained or 

how to retain the screenings performed. Furthermore, there was not a consistent way to track the 

CIP information received by the service team when LPL registered representatives contacted 

them. Instead, service personnel used ad hoc methods to record CIP information received from 

the customers or the reasons why restrictions had been lifted. This information, when it was 

recorded, was typed by the service personnel into an internal LPL system connected with the 



 

5 

 

account. The notes were not maintained in any back-end system, and there were instances where 

the notes taken by the service personnel were vague or incomplete. The lack of a consistent 

approach led to failures to retain records as required by LPL’s AML Policies. 

19. The CIP Rule further requires broker-dealers to adopt “procedures for responding 

to circumstances in which the broker-dealer cannot form a reasonable belief that it knows the 

true identity of a customer,” including a description of “[w]hen the broker-dealer should close an 

account after attempts to verify a customer’s identity fail.” 31 C.F.R. § 1023.220(a)(2)(iii)(C). 

20. As noted above, from at least May 2019 to December 17, 2020, LPL’s AML 

Policies stated that an account that failed CIP should be closed; however, LPL’s AML Policies 

did not provide instructions for when or how this should occur. As a result, during this time 

period, accounts that had not passed CIP were not closed in violation of LPL’s AML Policies. 

On December 18, 2020, LPL revised its AML Policies to specify that activity would be restricted 

on accounts that had not passed CIP. LPL personnel had 60 days to form a reasonable belief of 

the true identity of the account holder. If LPL collected information sufficient to establish 

reasonable belief, service personnel could lift the restrictions. After 60 days, if LPL still did not 

have information sufficient to form a reasonable belief of the true identity of the account holder, 

the account closure process should begin. 

21. In practice, even after revising the AML Policies, LPL did not have a process for 

initiating the account closure process for accounts that still had insufficient information about the 

identity of the account holders after 60 days. This led to thousands of accounts that had failed 

LPL’s CIP but remained open after 60 days, in violation of LPL’s AML Policies. For example, 

on October 12, 2022, LPL identified 7,356 accounts that had not passed CIP but were allowed to 

remain open past 60 days, despite the AML Policies’ requirement to close such accounts after a 

60-day period. 

22. LPL’s AML Policies required LPL to obtain information sufficient to form a 

reasonable belief of the true identity of the account holder before lifting restrictions on the 

account.  

23. In a review of its practices, LPL found that LPL’s service personnel lacked proper 

knowledge and training regarding CIP issues. In addition, service personnel often did not have 

the most up-to-date resource documents available, and thus their knowledge of LPL’s CIP policy 

requirements was outdated. Moreover, there were limited oversight procedures for reviewing 

CIP-related restrictions to determine that the underlying CIP issue was truly resolved. As a 

result, LPL service personnel lifted restrictions despite not having adequately resolved the CIP 

issues for the account. 

24. Because of LPL’s CIP recordkeeping failures described above, LPL could not 

determine how many accounts had restrictions that were lifted improperly. However, during the 

Relevant Period, LPL conducted monthly CIP AML assurance reviews, which analyzed a 

sampling of restrictions that had been lifted. These monthly reviews routinely found instances 

where restrictions had been removed from accounts even though CIP risk factors had not been 

cleared. Despite the issues discovered in these reviews, LPL failed to address the underlying 

problems with the company’s CIP. 



 

6 

 

25. As a result of the above, and in violation of its AML Policies, LPL failed to 

document accurately its CIP procedures. 

C. LPL’s Failure to Follow Its AML Policies Regarding the Closure of Prohibited 

Accounts 

26. As further described below, LPL failed to close certain higher-risk accounts that 

its AML Policies had deemed prohibited.  

27. As early as May 2019, LPL’s AML Policies prohibited LPL from “doing business 

with any person or entity involved with marijuana [cannabis] production, distribution or other 

ancillary operations.” The policy applied to “new accounts established for such entities or 

persons” and noted that “[e]xisting accounts that are discovered after the fact to be involved in 

such activities will be addressed on a case by case basis.” 

28. Despite the policy prohibiting doing business with any person or entity involved, 

either on a direct or ancillary basis, with cannabis production or distribution, LPL nevertheless 

permitted numerous cannabis-related accounts to be opened and remain open for years. As of 

February 2023, approximately 1,400 accounts holding approximately $350 million in assets were 

deemed inconsistent with LPL’s AML Policies regarding cannabis-related businesses. 

29. Since at least May 2019, LPL’s AML Policies also prohibited opening or 

maintaining accounts with customers in certain foreign countries and directed employees to 

LPL’s Foreign Accounts Policy for further guidance. The Foreign Accounts Policy, incorporated 

by reference into LPL’s AML Policies, significantly limited the circumstances under which 

accounts in foreign jurisdictions could be opened or serviced, absent a formal exception. 

30. The Foreign Accounts Policy designated only one country, Mexico, as an “open 

jurisdiction” where LPL financial professionals were permitted to solicit new business as well as 

service accounts. The policy provided a list of countries designated as “maintain jurisdictions” 

where existing accounts were allowed to be serviced, but financial professionals were prohibited 

from soliciting or establishing new business. All other countries were “closed jurisdictions” 

where accounts could not be opened or serviced, absent a formal exception. 

31. In violation of its Foreign Accounts Policy, LPL opened and serviced accounts in 

“closed jurisdictions” and allowed numerous accounts to be opened in “maintain jurisdictions.” 

32. As early as 2019, LPL was aware of these violations of its Foreign Accounts 

Policy. LPL’s Internal Audit issued a January 13, 2020 report with an overall rating of “Major 

Improvements Needed” regarding LPL’s supervision of foreign accounts. The report noted that 

LPL “lacks the ability to monitor and manage the risk(s) associated with each Foreign Account, 

as well as the ability to implement an ongoing monitoring process” and that a “formal, 

standardized process for granting exceptions” to the Foreign Accounts Policy [had] not been 

established, documented and communicated.” Nevertheless, in spite of these risks, “LPL 

continue[d] to service over 4000 [foreign accounts for customers residing] in 84 countries around 

the world, of which over 90% of U.S. Expatriates reside in Closed Jurisdictions.” 



 

7 

 

33. Despite repeated internal audits and assessments noting the failures these areas, 

LPL continued to service cannabis accounts and foreign accounts in violation of LPL’s AML 

Policies and Foreign Accounts Policy regarding these accounts.  

34. As a result of the above, and in violation of LPL’s AML Policies and Foreign 

Accounts Policy, LPL failed to document accurately its Ongoing CDD procedures. 

Violations 

35. As a result of the conduct described above, LPL willfully1 violated Section 17(a) 

of the Exchange Act and Rule 17a-8 thereunder. 

LPL’s Remedial Efforts 

36. In determining to accept the Offer, the Commission considered remedial acts 

undertaken by LPL and cooperation afforded the Commission staff. 

37. In early 2023, after the Commission staff began its investigation and contacted 

LPL regarding these issues, LPL retained a third-party compliance consultant (“Compliance 

Consultant”) to conduct a review and assessment of its policies, procedures, and practices related 

to CIP and customer due diligence, and to provide findings and recommendations to LPL (the 

“Compliance Review”). The Compliance Consultant identified numerous issues with the relevant 

policies, procedures, and practices related to LPL’s CIP and customer due diligence (the 

“Findings”) and provided recommendations to LPL for each. LPL has taken steps to execute the 

Compliance Consultant’s recommendations. 

38. LPL has also made changes to its leadership and organization since the start of the 

Commission’s investigation, including the appointment of new personnel in key legal and 

compliance roles. LPL has also increased resources allocated to its compliance program, 

including specifically in relation to its AML program. 

Undertakings 

Respondent has undertaken to: 

39. Continue its retention of the Compliance Consultant to conduct a comprehensive 

review of LPL’s CIP and customer due diligence (“CDD”) policies and procedures. LPL shall 

exclusively bear all costs, including compensation and expenses, associated with the retention of 

the Compliance Consultant. 

40. LPL shall require that, within forty-five (45) days after completion of the 

comprehensive review of LPL’s CIP and CDD policies and procedures, the Compliance 

Consultant shall submit a detailed written report of its findings (the “Interim Report”) to LPL 

and the Commission staff.  LPL shall require that the Interim Report include a description of the 

                                                 
1 “Willfully,” for purposes of imposing relief under Section 15(b) of the Exchange Act and Section 203(e) of the 

Advisers Act, “‘means no more than that the person charged with the duty knows what he is doing.’”  See Wonsover 

v. SEC, 205 F.3d 408, 414 (D.C. Cir 2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)). 



 

8 

 

review performed, the names of the individuals who performed the review, the conclusions 

reached, and the Compliance Consultant’s recommendations for changes in or improvements to 

LPL’s CIP and CDD policies and procedures, and a summary of the plan prepared by LPL for 

implementing the recommended changes in or improvements to LPL’s policies and procedures.  

If the Compliance Consultant’s December 2023 report meets the requirements outlined in 

paragraphs 39 and 40, it may be re-submitted as the Interim Report.  In this event, LPL shall 

require that the Interim Report be re-submitted within forty-five (45) days after entry of this 

Order. 

41. LPL shall adopt all recommendations contained in the Interim Report within two-

hundred (200) days of the date of submission of the Interim Report; provided, however, that 

within thirty (30) days after the date of submission of the Interim Report, LPL shall in writing 

advise the Compliance Consultant and the Commission staff of any recommendations that LPL 

considers to be unduly burdensome, impractical, or inappropriate.  With respect to any 

recommendation LPL considers to be unduly burdensome, impractical, or inappropriate, LPL 

need not adopt that recommendation at that time but shall propose in writing an alternative 

policy, procedure, or system designed to achieve the same objective or purpose. 

42. As to any recommendation in the Interim Report on which LPL and the 

Compliance Consultant do not agree, LPL shall attempt in good faith to reach an agreement with 

the Compliance Consultant on an alternative proposal within sixty (60) days after the date of 

submission of the Interim Report. Within fifteen (15) days after the conclusion of the discussion 

and evaluation by LPL and the Compliance Consultant, LPL shall require that the Compliance 

Consultant inform LPL and the Commission staff in writing of the Compliance Consultant’s 

final determination concerning any recommendation objected to by LPL. LPL shall abide by the 

determinations of the Compliance Consultant and, within one hundred forty (140) days after final 

agreement between LPL and the Compliance Consultant or final determination of the 

Compliance Consultant, whichever occurs first, LPL shall adopt and implement all of the 

recommendations that the Compliance Consultant deems appropriate.  

43. One-Year Evaluation:  LPL shall require the Compliance Consultant to assess 

LPL’s CIP and CDD programs, commencing one year after submission of the Interim Report 

required by Paragraph 40 above. LPL shall require this review to evaluate LPL’s performance in 

its CIP and CDD programs.  Within 90 days after initiating this review, LPL shall require the 

Compliance Consultant to submit a report (the “One-Year Report”) to LPL and the Commission 

staff and shall ensure that the One-Year Report includes an updated assessment of LPL’s policies 

and procedures with regard to its CIP and CDD programs, including but not limited to any 

changes implemented in connection with the Interim Report. LPL shall require that the One-Year 

Report include a description of the review performed, the names of the individuals who 

performed the review, the conclusions reached, the Compliance Consultant’s recommendations 

for changes in or improvements to LPL’s CIP and CDD policies and procedures, and a summary 

of the plan prepared by LPL for implementing the recommended changes in or improvements to 

LPL’s policies and procedures.   

44. LPL shall adopt all recommendations contained in the One-Year Report within 

one hundred eighty (180) days of the date of the One-Year Report; provided, however, that 

within thirty (30) days after the date of the Report, LPL shall in writing advise the Compliance 



 

9 

 

Consultant and the Commission staff of any recommendations that LPL considers to be unduly 

burdensome, impractical, or inappropriate. With respect to any recommendation LPL considers 

to be unduly burdensome, impractical, or inappropriate, LPL need not adopt that 

recommendation at that time but shall propose in writing an alternative policy, procedure, or 

system designed to achieve the same objective or purpose. 

45. As to any recommendation in the One-Year Report on which LPL and the 

Compliance Consultant do not agree, LPL shall attempt in good faith to reach an agreement with 

the Compliance Consultant on an alternative proposal within sixty (60) days after the date of the 

One-Year Report. Within fifteen (15) days after the conclusion of the discussion and evaluation 

by LPL and the Compliance Consultant, LPL shall require that the Compliance Consultant 

inform LPL and the Commission staff in writing of the Compliance Consultant’s final 

determination concerning any recommendation objected to by LPL. LPL shall abide by the 

determinations of the Compliance Consultant and, within one hundred twenty (120) days after 

final agreement between LPL and the Compliance Consultant or final determination of the 

Compliance Consultant, whichever occurs first, LPL shall adopt and implement all of the 

recommendations that the Compliance Consultant deems appropriate.  

46. Within thirty (30) days of LPL’s adoption of all the recommendations in the One-

Year Report that the Compliance Consultant deems appropriate, LPL shall require the 

Compliance Consultant to submit a written final report to LPL and the Commission staff (the 

“Final Report”). The Final Report will (1) describe how LPL has adopted and implemented the 

Compliance Consultant’s recommendations, if any, from the Interim Report and One-Year 

Report; (2) describe details of any areas where LPL has not adequately adopted and implemented 

its recommendations, if any; and (3) include a statement from the Compliance Consultant on 

whether there are remaining gaps between LPL’s CIP and CDD policies, and LPL’s 

implementation thereof, and applicable federal securities laws related to CIP and CDD programs 

that have been identified. 

47. LPL shall cooperate fully with the Compliance Consultant and shall provide the 

Compliance Consultant with access to its files, books, records, and personnel as reasonably 

requested by the Compliance Consultant. For the period of the engagement, LPL shall not have 

the authority to terminate the Compliance Consultant or substitute another compliance consultant 

for the Compliance Consultant without the prior written approval of the Commission staff. 

48. The reports by the Compliance Consultant will likely include confidential 

financial, proprietary, competitive business or commercial information. Public disclosure of the 

reports could discourage cooperation, impede pending or potential government investigations, or 

undermine the objectives of the reporting requirement. For these reasons, among others, the 

reports and the contents thereof are intended to remain and shall remain non-public, except (1) 

pursuant to court order, (2) as agreed to by the parties in writing, (3) to the extent that the 

Commission determines in its sole discretion that disclosure would be in furtherance of the 

Commission’s discharge of its duties and responsibilities, or (4) as otherwise required by law.  

49. LPL undertakes to certify, in writing, compliance with the undertakings set forth 

above. The certification shall identify the undertakings, provide written evidence of compliance 

in the form of a narrative, and be supported by exhibits sufficient to demonstrate compliance. 



 

10 

 

The Commission staff may make reasonable requests for further evidence of compliance, and 

Respondent agrees to provide such evidence. The certification and supporting material shall be 

submitted to Stacy Bogert, Associate Director, Division of Enforcement, Securities and 

Exchange Commission, 100 F Street NE, Washington, D.C. 20549, with a copy to the Office of 

Chief Counsel of the Enforcement Division, no later than sixty (60) days from the date of the 

completion of the undertakings.  

50. LPL shall preserve for a period of not less than six (6) years from the end of the 

fiscal year last used, the first two years in an easily accessible place, any record of its compliance 

with the undertakings set forth herein.  

51. For good cause shown, the Commission staff may extend any of the procedural 

dates relating to the undertakings. Deadlines for procedural dates shall be counted in calendar 

days, except that if the last day falls on a weekend or federal holiday, the next business day shall 

be considered to be the last day.   

IV. 

In view of the foregoing, the Commission deems it appropriate and in the public interest 

to impose the sanctions agreed to in Respondent LPL’s Offer. 

Accordingly, pursuant to Sections 15(b) and 21C of the Exchange Act and Section 203(e) 

of the Advisers Act, it is hereby ORDERED that: 

A. Respondent LPL cease and desist from committing or causing any violations and 

any future violations of Section 17(a) of the Securities Exchange Act and Rule 

17a-8 thereunder. 

B. Respondent LPL is censured. 

C. Respondent LPL shall, within 14 days of the entry of this Order, pay a civil 

money penalty of $18,000,000 to the Securities and Exchange Commission for 

transfer to the general fund of the United States Treasury, subject to Exchange 

Act Section 21F(g)(3). If timely payment is not made, additional interest shall 

accrue pursuant to 31 U.S.C. §3717. 

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request; 

(2) Respondent may make direct payment from a bank account via Pay.gov through 

the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United States 

postal money order, made payable to the Securities and Exchange Commission 

and hand-delivered or mailed to: 



 

11 

 

Enterprise Services Center 

Accounts Receivable Branch  

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

Payments by check or money order must be accompanied by a cover letter identifying 

LPL as a Respondent in these proceedings, and the file number of these proceedings; a copy of 

the cover letter and check or money order must be sent to Stacy Bogert, Associate Director, 

Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 

20549. 

D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall 

be treated as penalties paid to the government for all purposes, including all tax 

purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees 

that in any Related Investor Action, it shall not argue that it is entitled to, nor shall 

it benefit by, offset or reduction of any award of compensatory damages by the 

amount of any part of Respondent’s payment of a civil penalty in this action 

(“Penalty Offset”). If the court in any Related Investor Action grants such a 

Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a 

final order granting the Penalty Offset, notify the Commission's counsel in this 

action and pay the amount of the Penalty Offset to the Securities and Exchange 

Commission. Such a payment shall not be deemed an additional civil penalty and 

shall not be deemed to change the amount of the civil penalty imposed in this 

proceeding. For purposes of this paragraph, a “Related Investor Action” means a 

private damages action brought against Respondent by or on behalf of one or 

more investors based on substantially the same facts as alleged in the Order 

instituted by the Commission in this proceeding. 

E. Respondent shall comply with the undertakings described in paragraphs 39 – 51 

above. 

 

By the Commission. 

Vanessa A. Countryman  

Secretary 


	I.
	II.
	III.
	Summary
	1. From at least May 2019 through December 2023 (the “Relevant Period”), LPL Financial LLC (“LPL”), a dually registered investment adviser and broker-dealer, failed to follow its own anti-money laundering (“AML”) policies and procedures (“AML Policies...
	2. Among other problems, LPL failed to properly verify new accounts; failed to timely close accounts that did not pass its CIP screening measures; and failed to close or restrict certain accounts, such as cannabis-related and foreign accounts, that we...
	3. As a result of these failures, LPL willfully violated its obligations under Section 17(a) of the Exchange Act and Rule 17a-8 thereunder, which require broker-dealers to comply with reporting, recordkeeping, and record retention requirements in regu...

	Respondent
	4. LPL Financial LLC, a California limited liability company with its principal office in Fort Mill, South Carolina, has been registered with the Commission as a broker-dealer since 1973 and an investment adviser since 1975. In 2021, LPL was subject t...

	Background
	5. On April 29, 2003, the Commission and the Treasury Department jointly issued the CIP Rule. The CIP Rule is designed to prevent use of the securities industry for money laundering and terrorist financing and requires broker-dealers to make and keep ...
	6. The CIP must include risk-based procedures for verifying the identity of each customer, to the extent reasonable and practicable, to enable the broker-dealer to form a reasonable belief that it knows the true identity of each customer. 31 C.F.R. § ...
	7.  The broker-dealer’s CIP also must include procedures for making and maintaining records of the customer’s identifying information and its verification of the customer’s identity. 31 C.F.R. § 1023.220(a)(3).
	8. Under the Ongoing CDD requirements of the AML Program Rule for broker-dealers, broker-dealers must adopt “[a]ppropriate risk-based procedures for conducting ongoing customer due diligence,” which include (but are not limited to) “[u]nderstanding th...
	9. Rule 17a-8, which was promulgated under Section 17(a) of the Exchange Act, requires broker-dealers to comply with the reporting, recordkeeping and record retention requirements in regulations implemented under the Bank Secrecy Act, including the CI...

	Facts
	10. According to the 2023 Form 10-K of LPL Financial Holdings Inc., the parent company of LPL, LPL and its affiliates serve the advisor-mediated marketplace as the nation’s largest independent broker-dealer, an investment advisory firm, and a custodia...
	A. LPL’s Policies and Procedures for Identification and Verification of Account Holders

	11. During the Relevant Period, when a customer opened a new brokerage account, LPL’s AML Policies required LPL to collect certain information, including the account holder’s  a) full name; b) mailing address and residence address (or principal place ...
	12. LPL sent the information that it obtained from customers to a third-party vendor to conduct an overnight screening process to help LPL determine whether it had obtained information sufficient to support a reasonable belief that it knew the custome...
	13. Throughout the Relevant Period, account restrictions were placed on accounts with unresolved CIP issues, as required by LPL’s AML Policies. These restrictions included asset freezes, which prevented account holders from taking assets out of the ac...
	14. From at least May 2019 to December 17, 2020, LPL’s AML Policies did not specify a timeframe for the account closure processes after a customer failed CIP verification. On December 18, 2020, LPL updated its AML Policies to specify that for accounts...
	15. Throughout the Relevant Period, after an account was restricted, LPL’s registered representatives could seek to resolve the CIP issues on behalf of the account holders. As part of this process, a registered representative could call the LPL servic...
	16. Several times during the Relevant Period, LPL’s Internal Audit flagged LPL’s restriction-lifting process as problematic. For example, a May 2019 email described a prior finding by LPL’s Internal Audit that the current process “allows placing, lift...
	B. LPL’s Failure to Follow Its AML Policies Regarding CIP

	17. The CIP Rule requires LPL to “include procedures for making and maintaining a record of all information obtained under procedures implementing [LPL’s CIP].” 31 C.F.R. § 1023.220(a)(3). The records are required to be retained for five years. 31 C.F...
	18. LPL’s AML Policies did not describe what CIP information should be retained or how to retain the screenings performed. Furthermore, there was not a consistent way to track the CIP information received by the service team when LPL registered repres...
	19. The CIP Rule further requires broker-dealers to adopt “procedures for responding to circumstances in which the broker-dealer cannot form a reasonable belief that it knows the true identity of a customer,” including a description of “[w]hen the bro...
	20. As noted above, from at least May 2019 to December 17, 2020, LPL’s AML Policies stated that an account that failed CIP should be closed; however, LPL’s AML Policies did not provide instructions for when or how this should occur. As a result, durin...
	21. In practice, even after revising the AML Policies, LPL did not have a process for initiating the account closure process for accounts that still had insufficient information about the identity of the account holders after 60 days. This led to thou...
	22. LPL’s AML Policies required LPL to obtain information sufficient to form a reasonable belief of the true identity of the account holder before lifting restrictions on the account.
	23. In a review of its practices, LPL found that LPL’s service personnel lacked proper knowledge and training regarding CIP issues. In addition, service personnel often did not have the most up-to-date resource documents available, and thus their know...
	24. Because of LPL’s CIP recordkeeping failures described above, LPL could not determine how many accounts had restrictions that were lifted improperly. However, during the Relevant Period, LPL conducted monthly CIP AML assurance reviews, which analyz...
	25. As a result of the above, and in violation of its AML Policies, LPL failed to document accurately its CIP procedures.
	C. LPL’s Failure to Follow Its AML Policies Regarding the Closure of Prohibited Accounts

	26. As further described below, LPL failed to close certain higher-risk accounts that its AML Policies had deemed prohibited.
	27. As early as May 2019, LPL’s AML Policies prohibited LPL from “doing business with any person or entity involved with marijuana [cannabis] production, distribution or other ancillary operations.” The policy applied to “new accounts established for ...
	28. Despite the policy prohibiting doing business with any person or entity involved, either on a direct or ancillary basis, with cannabis production or distribution, LPL nevertheless permitted numerous cannabis-related accounts to be opened and remai...
	29. Since at least May 2019, LPL’s AML Policies also prohibited opening or maintaining accounts with customers in certain foreign countries and directed employees to LPL’s Foreign Accounts Policy for further guidance. The Foreign Accounts Policy, inco...
	30. The Foreign Accounts Policy designated only one country, Mexico, as an “open jurisdiction” where LPL financial professionals were permitted to solicit new business as well as service accounts. The policy provided a list of countries designated as ...
	31. In violation of its Foreign Accounts Policy, LPL opened and serviced accounts in “closed jurisdictions” and allowed numerous accounts to be opened in “maintain jurisdictions.”
	32. As early as 2019, LPL was aware of these violations of its Foreign Accounts Policy. LPL’s Internal Audit issued a January 13, 2020 report with an overall rating of “Major Improvements Needed” regarding LPL’s supervision of foreign accounts. The re...
	33. Despite repeated internal audits and assessments noting the failures these areas, LPL continued to service cannabis accounts and foreign accounts in violation of LPL’s AML Policies and Foreign Accounts Policy regarding these accounts.
	34. As a result of the above, and in violation of LPL’s AML Policies and Foreign Accounts Policy, LPL failed to document accurately its Ongoing CDD procedures.

	Violations
	35. As a result of the conduct described above, LPL willfully  violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder.

	LPL’s Remedial Efforts
	36. In determining to accept the Offer, the Commission considered remedial acts undertaken by LPL and cooperation afforded the Commission staff.
	37. In early 2023, after the Commission staff began its investigation and contacted LPL regarding these issues, LPL retained a third-party compliance consultant (“Compliance Consultant”) to conduct a review and assessment of its policies, procedures, ...
	38. LPL has also made changes to its leadership and organization since the start of the Commission’s investigation, including the appointment of new personnel in key legal and compliance roles. LPL has also increased resources allocated to its complia...

	Undertakings
	39. Continue its retention of the Compliance Consultant to conduct a comprehensive review of LPL’s CIP and customer due diligence (“CDD”) policies and procedures. LPL shall exclusively bear all costs, including compensation and expenses, associated wi...
	40. LPL shall require that, within forty-five (45) days after completion of the comprehensive review of LPL’s CIP and CDD policies and procedures, the Compliance Consultant shall submit a detailed written report of its findings (the “Interim Report”) ...
	41. LPL shall adopt all recommendations contained in the Interim Report within two-hundred (200) days of the date of submission of the Interim Report; provided, however, that within thirty (30) days after the date of submission of the Interim Report, ...
	42. As to any recommendation in the Interim Report on which LPL and the Compliance Consultant do not agree, LPL shall attempt in good faith to reach an agreement with the Compliance Consultant on an alternative proposal within sixty (60) days after th...
	43. One-Year Evaluation:  LPL shall require the Compliance Consultant to assess LPL’s CIP and CDD programs, commencing one year after submission of the Interim Report required by Paragraph 40 above. LPL shall require this review to evaluate LPL’s perf...
	44. LPL shall adopt all recommendations contained in the One-Year Report within one hundred eighty (180) days of the date of the One-Year Report; provided, however, that within thirty (30) days after the date of the Report, LPL shall in writing advise...
	45. As to any recommendation in the One-Year Report on which LPL and the Compliance Consultant do not agree, LPL shall attempt in good faith to reach an agreement with the Compliance Consultant on an alternative proposal within sixty (60) days after t...
	46. Within thirty (30) days of LPL’s adoption of all the recommendations in the One-Year Report that the Compliance Consultant deems appropriate, LPL shall require the Compliance Consultant to submit a written final report to LPL and the Commission st...
	47. LPL shall cooperate fully with the Compliance Consultant and shall provide the Compliance Consultant with access to its files, books, records, and personnel as reasonably requested by the Compliance Consultant. For the period of the engagement, LP...
	48. The reports by the Compliance Consultant will likely include confidential financial, proprietary, competitive business or commercial information. Public disclosure of the reports could discourage cooperation, impede pending or potential government...
	49. LPL undertakes to certify, in writing, compliance with the undertakings set forth above. The certification shall identify the undertakings, provide written evidence of compliance in the form of a narrative, and be supported by exhibits sufficient ...
	50. LPL shall preserve for a period of not less than six (6) years from the end of the fiscal year last used, the first two years in an easily accessible place, any record of its compliance with the undertakings set forth herein.
	51. For good cause shown, the Commission staff may extend any of the procedural dates relating to the undertakings. Deadlines for procedural dates shall be counted in calendar days, except that if the last day falls on a weekend or federal holiday, th...


	IV.
	D. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees t...