LPL Financial Settles Charges Involving Violation of Anti-Money Laundering Rule
Sept. 30, 2021
File No. 3-20612
September 30, 2021 - The Securities and Exchange Commission today announced settled charges against LPL Financial LLC for anti-money laundering rule violations and for being a cause of certain antifraud violations by Eugenio Garcia Jimenez, Jr.'s, an unregistered investment adviser not affiliated with LPL. LPL is paying more than $4.8 million to resolve this matter.
According to the SEC's order, Garcia opened an account at LPL to further his scheme to defraud his advisory client, the Municipality of Mayagüez, Puerto Rico (the "City"). The order finds that, although required by LPL's Customer Identification Program (CIP) rule procedures, LPL did not verify certain identification documents before opening the account. Further, the order finds that because LPL did not verify the purported customer address provided by Garcia - which differed from the registered address of Mayagüez Economic Development Inc. (MEDI) (the City's municipal corporation) - LPL could not comply with its obligation to accurately document its CIP procedures. Additionally, according to the SEC's order, even though LPL was in possession of suspicious and conflicting customer account information, LPL received assets transferred from a previous firm and processed wire transfers resulting in Garcia's further misappropriation of millions of dollars from MEDI.
The SEC previously filed a civil complaint in federal district court against Garcia alleging he conducted a scheme to defraud his advisory client, the City, through which Garcia misappropriated millions of dollars of taxpayer funds. The SEC's action against Garcia is pending. Garcia was later criminally charged by the U.S. Attorney's Office for the District of Puerto Rico based on similar allegations of misconduct.
The SEC's order finds that LPL willfully violated Section 17(a) of the Exchange Act and Rule 17a-8 thereunder, and was a cause of Garcia's violations of Sections 17(a)(2) and (3) of the Securities Act and Section 206(2) of the Advisers Act. LPL, without admitting or denying the SEC's findings, agreed to settle the charges by undertaking significant remedial measures, including the payment of over $4.1 million directly to MEDI, representing investor losses plus interest. LPL also agreed to pay a civil penalty of $750,000. The penalty will distributed to MEDI via a Fair Fund.
The SEC's investigation, which is continuing, is being conducted by Sean M. O'Neill of the Miami Regional Office and supervised by Jason R. Berkowitz and Glenn S. Gordon, and with the assistance of Paul N. Anderson, Jason P. Haggar, and Zerubbabel A. Johnson of the SEC's Washington, D.C. office