LPL facing SEC investigation into unapproved personal devices

LPL's disclosure follows a crackdown by US regulators on financial firms' failure to monitor employee communications on messaging apps.

LPL Financial said the Securities and Exchange Commission had made inquiries into whether the broker-dealer was meeting industry standards related to retaining with electronic communications on personal devices unapproved by the giant brokerage, according to an LPL filing Feb. 23 with the SEC.

According to LPL Financial’s annual audited financial statement, called a Focus Report, there’s no indication whether the personal devices are those of the more than 20,000 registered reps and investment advisors registered with the firm.

But one financial advisor, who asked not to be named, said that at a meeting LPL held in the fall with its advisors, it focused on texting messages.

“Obviously, it’s on the SEC’s radar,” the advisor said.

InvestmentNews reported last year that unmonitored messaging apps were cropping up quickly at wealth management firms as advisors returned to office life in the wake of the Covid-19 pandemic and reshaped how they interacted with colleagues and clients.

Indeed, apps like WhatsApp and email platforms like Gmail are beginning to play an oversized role in advisor communications, a trend that could increase as more clients choose to communicate via their smartphones.

A spokesperson for LPL Financial did not respond to requests for comment.

The term “personal devices” typically indicates mobile phones, smart phones, tablets and laptops.

“In October 2022, [LPL Financial] received a request for information from the SEC in connection with an investigation of the company’s compliance with records preservation requirements for business-related electronic communications stored on personal devices or messaging platforms that have not been approved by the company,” according to the Focus Report.

LPL said in the filing that it intended to cooperate with the SEC in the matter and that it could not estimate a possible loss related to the inquiry at this time.

Bloomberg News reported in May that the SEC was reviewing mobile phones carried by top traders and deal-makers in the largest-ever probe into clandestine messaging on platforms such as WhatsApp.

And in September, the SEC and the Commodity Futures Trading Commission reached settlements with more than a dozen banks in a sprawling probe into financial firms’ failure to monitor employees’ communications on unauthorized messaging apps, bringing total penalties in the matter to more than $2 billion.

[More: Wells Fargo latest to face probe of use of messaging apps]