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Regulatory Sanctions

An LPL Branch Manager Goes Rogue - Or - Who’s Supervising the Supervisor?

April 11, 2019

by Howard Haykin


Check the boxes: A firm …
  • Establishes supervisory policies and procedures (WSPs) that prohibits certain transactions and relationships between its registered reps and unrelated firm customers.  
  • Establishes WSPs that set out procedures by which supervisory personnel monitor their direct reports for compliance with firm policies and FINRA rules and regulations.  
  • Disseminates Annual Compliance Questionnaires (ACQs) that enable all registered reps to affirm their understanding of, and full compliance with firm policies and FINRA rules and regulations.  
What else can a firm do when ... a Branch Officer Manager – with 24 years’ experience and a Series 8 Supervisory license - chooses to defy all the above?



LPL Financial did the only thing it could, which was to discharge (U5) the individual for violating “Firm policy regarding fiduciary capacities and being a joint owner on two different clients banking accounts.” And FINRA followed up by barring this individual from the industry.



WHAT WENT WRONG.    Between May 2014 and December 2016, the individual (“BOM”) circumvented her firm's supervisory system and procedures by failing to disclose that she: (i) was named as power of attorney (POA) for a firm customer; (ii) had control over 2 firm customers' bank accounts; and, (iii) was named as successor trustee and beneficiary of a firm customer's trust. In addition, the BOM made false statements in firm documents relating to each.  [All in violation of FINRA Rule 2010.


  • In April 2014, a terminally ill customer (Client #1) … granted the BOM power of attorney over his account


  • In May 2014, Client #1 … designated the BOM as his transfer-on-death beneficiary and gave her the authority to write checks and deposit and withdraw money from the account. Shortly thereafter the customer died and funds in the account passed to the BOM.


  • In the summer of 2014, another customer (Client #2) … designated the BOM as a joint owner to a bank account that the client held with her husband. After both spouses died, $53,000 in the account passed to the BOM.


  • In September and October 2015, shortly after the client’s death and before her estate had settled, 2 automatic transfers from the client’s LPL account for $5,300 were made into the bank account, which had then passed to the BOM. Even though Client #2 had designated these brokerage funds to beneficiaries other than the BOM, those funds were never returned to the brokerage account.


  • In June 2015, Client #2 … appointed the BOM as successor trustee over her living trust and named the BOM as a beneficiary of the trust granting her a $248,000 payment from the trust.


  • In September 2015 … the BOM requested LPL’s permission to act as trustee for Client #2’s trust – stating that Client #2 was her aunt - which was not true. Based on the BOM’s misrepresentation, LPL approved her request.


  • In 2014 and 2015, the BOM … falsely stated on LPL ACQ’s that she had not been granted control over any customer assets. In 2014, the BOM falsely denied having been granted any POA over a firm customer’s account.



This case was reported in FINRA Disciplinary Actions for January 2019.

For further details, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016051267401.