June 20, 2013
by Mark Schoeff Jr., Investment News
Less than a month after getting hit with the largest Finra fine ever, LPL taps a former SEC official
LPL Financial LLC has had several recent run-ins with regulators, but that’s not the reason it hired a former Securities and Exchange Commission official as its top legal officer, according to the company’s chief executive.
David Bergers, former acting deputy director of the SEC’s Division of Enforcement, will take over Aug. 5 as general counsel and managing director for legal and government relations at the firm’s holding company, LPL Financial Holdings Inc.
“We’re looking for the best talent we can find,” said LPL chairman and chief executive Mark Casady. “In this case, it was someone who was at the SEC recently.”
As general counsel for LPL’s holding company, Mr. Bergers, 45, will be in a position to build LPL’s business, according to Mr. Casady.
“He’s someone who’s prone to taking action and getting things done,” he said.
Still, Mr. Casady acknowledged that Mr. Bergers’ “deep knowledge and very recent experience at the SEC” was a factor in hiring him to oversee the firm’s legal staff.
“He needs to make sure we have the right amount of resources and tools for them,” Mr. Casady said.
Last month, LPL was fined $7.5 million by the Financial Industry Regulatory Authority Inc. for 35 significant e-mail violations — the largest e-mail-related penalty in Finra’s history.
At the time, Finra pointed to LPL’s rapid growth as a factor in its compliance breakdown.
“As LPL rapidly grew its business, the firm failed to devote sufficient resources to update its e-mail system, which became increasingly complex and unwieldy for LPL to manage and monitor effectively,” Finra said in a statement. “The firm was well aware of its e-mail systems’ failures and the overwhelming complexity of its systems.”
LPL, which has 13,000 registered reps and advisers, had its initial public offering in 2010 after a decade of rapid growth.
In addition to the Finra action, the firm last month was hit with a $500,000 fine by Massachusetts securities regulators — and had to pay $4.8 million in investor restitution — for failing to properly supervise brokers selling nontraded REITs.
Mr. Bergers, who spent 13 years at the SEC and was head of the agency’s Boston regional office from 2006 until this year, said he does not have a mandate to make specific changes in LPL’s compliance system. But he was drawn to the company because of its commitment to supporting the personnel and technology necessary to strengthen the function.
“I’ve been impressed by the investment LPL is making in these areas,” Mr. Bergers said.
He will lead the legal and government relations while another recent LPL hire, Michelle Oroschakoff, will head up control and risk management. Ms. Oroschakoff was appointed chief risk management officer and managing director earlier this month. She most recently was global chief risk officer of the wealth management division at Morgan Stanley.
Both Mr. Bergers and Ms. Oroschakoff will report directly to Mr. Casady.
Prior to joining the SEC, Mr. Bergers was a vice president and assistant general counsel for a regional broker-dealer, Tucker Anthony Inc., which has been taken over by another firm. He was also counsel to Freedom Capital Management.
Mr. Bergers replaces Stephanie Brown, LPL’s current chief legal officer and a 24-year veteran of the firm.The hiring of former SEC and Finra officials is typical in the financial industry, according to Jon Henschen, president of Henschen & Associates LLC. “They do that as a move to be looked upon more favorably by regulators,” Mr. Henschen said. “If regulators perceive that as the motivation, it could rain on that parade. It doesn’t always work out.”
SEC rules will prevent Mr. Bergers from appearing before the agency to represent LPL until June 2014. Finra imposes no cooling-off period.
The revolving door between regulators and the financial industry has drawn criticism in Washington from lawmakers and nonprofit groups.
But Brian Rubin, a partner at Sutherland Asbill & Brennan LLP, said it’s helpful for financial firms to hire former regulators.
“You have a unique understanding of what the other side is thinking and what their priorities are,” said Mr. Rubin, himself a former SEC senior counsel for enforcement.
Mr. Bergers said that his experience at the SEC has given him insight on important issues for both investors and regulators.
“I feel very good about bringing what I’ve learned about serving investors to LPL,” he said.