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"I've Never Had a Complaint!"

Famous last words, I've heard them many times. Actually the bar is now so low you wonder if in a few years you'll hear, "I only have four complaints active, two others just fell off!" With the standard for reporting verbal and written complaints to the LPL Legal Department being the expression of a grievance OSJ reporting over the last 5 years has moved from 2-3 per year to 20-30.


a wrong considered as grounds for complaint, or something believed to cause distress: Inequitable taxation is the chief grievance. a complaint or resentment, as against an unjust or unfair act: to have a grievance against someone.

The good news is the vast majority end up with LPL Legal investigating and then writing a memo to the file to close it out. A big part of that outcome is impeccable paperwork, especially disclosures, and detailed client meeting notes from an electronic CRM like Redtail or Salesforce. Don't kid yourself, LPL will get behind and strongly support a Representative that has crossed the T's and dotted the I's.

Invariably though when a "grievance" manifests the first question from Representatives is, "will this be reported on my U4?" The answer depends.

U4 Question 14I(3)(a)

Within the past twenty four (24) months, have you been the subject of an investment-related,

consumer-initiated, written complaint, not otherwise reported under question 14I(2) above, which:

(a) alleged that you were involved in one or more sales practice violations and contained a claim for compensatory damages of $5,000 or more (if no damage amount is alleged, the complaint must be reported unless the firm has made a good faith determination that the damages from the alleged conduct would be less than $5,000)?

The term “sales practice violation” includes any conduct directed at or involving a customer which would constitute a violation of any rules for which a person could be disciplined by any self-regulatory organization; any provision of the Securities Exchange Act of 1934; or any state statute prohibiting fraudulent conduct in connection with the offer, sale or purchase of a security or in connection with the rendering of investment advice.

Sales practice violations come in two categories: Serious and Get a Lawyer. Serious types by themselves are not U4 reportable. If the customer adds in a claim for $5,000+ then it becomes reportable. Get a Lawyer types are automatically reportable even without a monetary claim.


Unsuitable Investment Advice Breach of Fiduciary Duty

Negligence Excessive Trading/Churning

Misrepresentation or Omission Unauthorized Trading

Fraud Failure to Supervise

Get a Lawyer

Forgery Theft


Silver Lining

Positive responses to Question 14I(3) remain applicable for two years from the date the complaint was received by the firm then can be cleared if no settlement over $15,000 was provided.

Protect Yourself

  • Keep detailed and timely notes and phone logs, preferably electronic.

  • Talk to your clients routinely about appropriate communication, especially email.

  • Don't shirk the paperwork.


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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. 

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