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What changed in LPL Financial Holdings Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of LPL Financial Holdings Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+435 added−412 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-23)

Top changes in LPL Financial Holdings Inc.'s 2023 10-K

435 paragraphs added · 412 removed · 349 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

84 edited+12 added−10 removed80 unchanged
Biggest changeThe independent channels pay advisors a greater share of advisory fees and brokerage commissions than the captive channels — generally 80-100% compared to 30-50% for captive channels. Our independent financial advisors are business owners who, unlike their captive counterparts, also have the opportunity to build equity in their own businesses.
Biggest changeWe believe we offer a compelling economic value proposition to independent advisors, which is a key factor in our ability to attract and retain advisors and their practices. The independent channels pay advisors a greater share of advisory fees and brokerage commissions than the captive channels — generally 80-100% compared to 30-50% for captive channels.
Of our employees, approximately 49% self-identify as women and 40% self-identify as Black, Indigenous, or People of Color. Talent Management and Culture Due to the complexity of our business, we compete with other companies for top talent, both inside and outside of our industry, and in multiple geographical areas within the United States.
Approximately 49% of our employees self-identify as women and 40% self-identify as Black, Indigenous or People of Color. Talent Management and Culture Due to the complexity of our business, we compete with other companies for top talent, both inside and outside of our industry, and in multiple geographical areas within the United States.
On February 13, 2023, a federal court issued a decision that invalidated the DOL’s interpretation of who qualifies as a fiduciary under ERISA in providing a rollover recommendation. We operate our business in compliance with a number of DOL prohibited transaction exemptions, including PTE 2020-02, where applicable.
On February 13, 2023, a federal court issued a decision that invalidated, in part, the DOL’s interpretation of who qualifies as a fiduciary under ERISA in providing a rollover recommendation. We operate our business in compliance with a number of DOL prohibited transaction exemptions, including PTE 2020-02, where applicable.
We are steadfast in our commitment to the advisor-mediated advice model and the belief that investors deserve access to personalized guidance from a financial advisor. We believe advisors should have the freedom to choose the business model, services and technology they need and to manage their client relationships.
We are steadfast in our commitment to the advisor-mediated model and the belief that investors deserve access to personalized guidance from a financial advisor. We believe advisors should have the freedom to choose the business model, services and technology they need and to manage their client relationships.
Flexibility of Our Business Model Our business model allows our advisors the freedom to choose how they conduct their business, subject to certain regulatory parameters, which has helped us attract and retain advisors from multiple channels, including wirehouses, regional broker-dealers, RIAs and other independent broker-dealers.
Flexibility of Our Business Model Our business model allows our advisors the freedom to choose how they conduct their business, subject to certain regulatory parameters, which has helped us attract and retain advisors from multiple channels, including wirehouses, regional broker-dealers, banks, other RIAs and other independent broker-dealers.
Our flexible business platform allows our advisors to choose the most appropriate business model to support their clients whether they conduct brokerage business, offer brokerage and/or fee-based services on our corporate RIA platform, or provide fee-based services through their own RIA practices.
Our flexible business platform allows our advisors to choose the most appropriate business model to support their clients whether they conduct brokerage business, offer brokerage and/or fee-based services on our corporate RIA platform, or provide fee-based services through their own RIA.
Our practice management and training services include: • personalized business consulting that helps eligible advisors and program leadership enhance the value and operational efficiency of their businesses; • advisory and brokerage consulting and financial planning to support advisors in growing their businesses through our broad range of products and fee-based offerings and wealth management services; • marketing strategies, including campaign templates, to enable advisors to build awareness of their services and capitalize on opportunities in their local markets; • our Liquidity & Succession solution to expand the options of advisors seeking to monetize their businesses or free themselves from entrepreneurial burdens through the sale of their practices; • an advisor loan program for advisors looking to buy another practice; • transition services to help advisors establish independent practices and migrate client accounts to us; and • in-person and virtual training and educational programs on topics including technology, use of advisory platforms and business development.
Our practice management and training services include: • personalized business consulting that helps eligible advisors and program leadership enhance the value and operational efficiency of their businesses; • advisory and brokerage consulting and financial planning to support advisors in growing their businesses through our broad range of products and fee-based offerings and wealth management services; • marketing strategies, including campaign templates, to enable advisors to build awareness of their services and capitalize on opportunities in their local markets; • our Liquidity & Succession solution to expand the options of advisors seeking to monetize their businesses or free themselves from entrepreneurial burdens through the sale of their practices; 3 Table of Contents • an advisor loan program for advisors looking to buy another practice; • transition services to help advisors establish independent practices and migrate client accounts to us; and • in-person and virtual training and educational programs on topics including technology, use of advisory platforms and business development.
LEAP, our Leadership Excellence and Achievement Program, encompasses the Company’s early talent initiatives and offers internship, part time and full time opportunities to develop the next generation of leaders. Training and Development We believe in our employees’ potential and provide training and development opportunities intended to maximize their performance and professional growth.
LEAP, our Leadership Excellence and Achievement Program, encompasses the Company’s emerging talent initiatives and offers internship, part time and full time opportunities to develop the next generation of leaders. Training and Development We believe in our employees’ potential and provide training and development opportunities intended to maximize their performance and professional growth.
Our more than 21,000 advisors average over 20 years in the industry, which generally allows us to focus on supporting and enhancing our advisors’ businesses without needing to provide basic training or subsidizing advisors who are new to the industry.
Our more than 22,000 advisors average over 20 years in the industry, which generally allows us to focus on supporting and enhancing our advisors’ businesses without needing to provide basic training or subsidizing advisors who are new to the industry.
We support our advisors by providing front-, middle- and back-office solutions through our distinct value proposition: integrated technology solutions, comprehensive clearing services, compliance services, consultative practice management programs and training, business services and planning and advice services, and in-house research.
We support our advisors by providing front-, middle- and back-office solutions through our distinct value proposition: integrated technology solutions, comprehensive clearing services, compliance services, consultative practice management programs and training, business services and planning and advice services, along with in-house research.
These arrangements allow us to provide outsourced customized clearing, advisory platforms and technology solutions that enable the financial advisors at these insurance companies to offer a breadth of services to their client base in an efficient manner. Our Value Proposition We are dedicated to making it easy for advisors to do what is best for their clients.
These arrangements allow us to provide outsourced customized clearing, advisory platforms and technology solutions that enable the financial advisors at these insurance companies to offer a breadth of services to their client base in an efficient manner. 2 Table of Contents Our Value Proposition We are dedicated to making it easy for advisors to do what is best for their clients.
Fee-Based Platforms and Support We have various fee-based platforms that provide centrally managed or customized solutions from which advisors can choose to meet the investment needs of their clients, including wrap-fee programs, mutual fund asset allocation programs, an advisor-enhanced digital advice program, advisory programs offered by third-party investment advisor 4 Table of Content s firms, financial planning services and retirement plan consulting services.
Fee-Based Platforms and Support We have various fee-based platforms that provide centrally managed or customized solutions from which advisors can choose to meet the investment needs of their clients, including wrap-fee programs, mutual fund asset allocation programs, an advisor-enhanced digital advice program, advisory programs offered by third-party investment advisor firms, financial planning services and retirement plan consulting services.
Item 1. Business Overview LPL serves the advisor-mediated marketplace as the nation’s largest independent broker-dealer, a leading investment advisory firm, and a top custodian. We serve more than 21,000 financial advisors, including advisors at approximately 1,100 enterprises and at approximately 500 registered investment advisor (“RIA”) firms nationwide, providing the front-, middle- and back-office support our advisors need.
Item 1. Business Overview LPL serves the advisor-mediated marketplace as the nation’s largest independent broker-dealer, a leading investment advisory firm, and a top custodian. We serve more than 22,000 financial advisors, including advisors at approximately 1,100 enterprises and at approximately 570 registered investment advisor (“RIA”) firms nationwide, providing the front-, middle- and back-office support our advisors need.
For the year ended December 31, 2022, no single relationship with our independent advisor practices or enterprises accounted for more than 3% of our advisory and commission revenue, and no single advisor accounted for more than 1% of our advisory and commission revenue. • The largest variable component of our expense, advisor payout percentages, is directly linked to revenue generated by our advisors. • A portion of our revenue is not asset-based or correlated with the equity financial markets.
For the year ended December 31, 2023, no single relationship with our independent advisor practices or enterprises accounted for more than 2% of our advisory and commission revenue, and no single advisor accounted for more than 1% of our advisory and commission revenue. • The largest variable component of our expense, advisor payout percentages, is directly linked to revenue generated by our advisors. • A portion of our revenue is not asset-based or correlated with the equity financial markets.
By expanding our reach and sourcing efforts and implementing diverse recruitment methods, we seek to create a workforce representative of the communities and partners we serve. We continue to invest in talent recruitment channels to introduce younger generations to the opportunities within wealth management and financial services.
By expanding our reach and sourcing efforts and implementing diverse recruitment methods, we seek to create a workforce representative of the communities and partners we serve. We continue to invest in talent recruitment channels to introduce emerging talent to the opportunities within wealth management and financial services.
Retirement Plan Services Regulation Certain subsidiaries, including LPL Financial, LPL Employee Services, LLC, PTC, Fiduciary Trust Company of New Hampshire and LPLIA, are subject to ERISA, and Section 4975 of the Code, and to regulations promulgated under ERISA or the Code, insofar as the subsidiaries provide services with respect to plan clients, or otherwise deal with 10 Table of Content s plan clients, plan participants and retirement, health and educational accounts that are subject to ERISA or Section 4975 of the Code.
Retirement Plan Services Regulation Certain subsidiaries, including LPL Financial, LPL Employee Services, LLC, PTC, Fiduciary Trust Company of New Hampshire and LPLIA, are subject to ERISA, Section 4975 of the Code, and to regulations promulgated under ERISA or the Code, insofar as the subsidiaries provide services with respect to plan clients, or otherwise deal with plan clients, plan participants and retirement, health and educational accounts that are subject to ERISA or Section 4975 of the Code.
We believe we are the market leader in providing support to over 3,500 financial advisors at approximately 1,100 enterprises nationwide. The core capabilities of these enterprises may not include investment and financial planning services, or they may find the technology, infrastructure and regulatory requirements of supporting such services to be cost-prohibitive.
We believe we are the market leader in the enterprise channel, providing support to over 3,600 financial advisors at approximately 1,100 enterprises nationwide. The core capabilities of these enterprises may not include investment and financial planning services, or they may find the technology, infrastructure and regulatory requirements of supporting such services to be cost-prohibitive.
In addition, we have mentorship programs that pair newer employees with more experienced professionals, giving mentees access to experience, expertise, and guidance. Finally, to help employees determine the next steps in their careers, we have a Career Growth Portal that provides employees with tools, resources, training courses and assessments as they chart their career paths.
In addition, we have mentorship programs that pair employees with more experienced professionals, giving mentees access to experience, expertise, and guidance. To help employees determine the next steps in their careers, we continue to provide a Career Growth Portal that provides employees with tools, resources, training courses and assessments as they chart their career paths.
Broker-Dealer Regulation LPL Financial and FRGIS are registered broker-dealers. LPL Financial is a clearing broker-dealer registered with the SEC, a member of the Financial Industry Regulatory Authority (“FINRA”) and a participant in various clearing organizations including the Depository Trust Company, the National Securities Clearing Corporation and the Options Clearing Corporation.
Broker-Dealer Regulation LPL Financial is a clearing broker-dealer registered with the SEC, a member of the Financial Industry Regulatory Authority (“FINRA”) and a participant in various clearing organizations including the Depository Trust Company, the National Securities Clearing Corporation and the Options Clearing Corporation.
For these enterprises, we provide their financial advisors with the infrastructure and services they need to be successful, allowing the enterprises to focus more attention and capital on their core businesses. We also provide support to approximately 3,600 additional financial advisors who are affiliated and licensed with insurance companies.
For these enterprises, we provide their financial advisors with the infrastructure and services they need to be successful, allowing the enterprises to focus more attention and capital on their core businesses. Finally, we provide support to approximately 3,800 additional financial advisors who are affiliated and licensed with insurance companies.
We also offer an employee stock 7 Table of Content s purchase plan that enables eligible employees to acquire an ownership interest in our company at a discount to prevailing market prices. We offer an array of benefits intended to meet the diverse needs of our employees and their eligible dependents.
We also offer an employee stock purchase plan that enables eligible employees to acquire an ownership interest in our Company at a discount to prevailing market prices. We offer an array of benefits intended to meet the diverse needs of our employees and their eligible dependents.
Our platform can accommodate a variety of independent advisor business models, including independent financial advisors, RIAs and employee advisors.
Our platform can accommodate a variety of independent advisor business models, including financial advisors as independent contractors, employee advisors and Independent RIAs.
Continuous improvement is a pillar of our culture, and we regularly solicit employee feedback on the effectiveness and quality of our support programs and their level of engagement with our business. We use this feedback to improve our programs and processes and inform decisions about our business.
Continuous improvement is a pillar of our culture, and we regularly solicit employee feedback on the effectiveness and quality of our programs, including our diversity and inclusion programs, and their level of engagement with our business. We use this feedback to improve our programs and processes and inform decisions about our business.
Compliance with these provisions has increased our compliance costs. Moreover, to the extent new rules or regulations affect the operations, financial condition, liquidity and capital requirements of financial institutions with which we do business, those institutions may seek to pass on increased costs, reduce their capacity to transact, or otherwise present inefficiencies in their interactions with us.
Moreover, to the extent new rules or regulations affect the operations, financial condition, liquidity and capital requirements of financial institutions with which we do business, those institutions may seek to pass on increased costs, reduce their capacity to transact, or otherwise present inefficiencies in their interactions with us.
As of December 31, 2022, the total assets in our client cash programs, which are held within advisory and brokerage accounts, were $64.1 billion. Other Services We provide a number of additional tools and services that enable advisors to maintain and grow their practices. Through our subsidiary PTC, we provide custodial services to trusts for estates and families.
As of December 31, 2023, the total assets in our client cash programs, which are held within advisory and brokerage accounts, were $48.5 billion. Other Services We provide a number of additional tools and services that enable advisors to maintain and grow their practices. Through our subsidiary PTC, we provide custodial services to trusts for estates and families.
Human Capital Our success depends on our ability to attract, hire, retain and develop highly-skilled professionals in a variety of specialties, including finance, technology, compliance, business development, cybersecurity and management. Workforce As of December 31, 2022, we had approximately 6,900 full-time employees, all of whom are located in the U.S.
Human Capital Our success depends on our ability to attract, hire, retain and develop highly-skilled professionals in a variety of specialties, including finance, technology, compliance, business development, cybersecurity and management. Workforce As of December 31, 2023, we had approximately 8,400 full-time employees, all of whom are located in the U.S.
Advisors licensed with LPL Financial as investment advisory representatives are able to conduct fee-based business on our corporate RIA platform, and advisors licensed with LPL Financial as registered representatives are able to conduct commission-based business on our brokerage platform.
Advisors licensed with LPL Financial as investment advisory representatives conduct fee-based business on our corporate RIA platform, and advisors licensed with LPL Financial as registered representatives conduct commission-based business on our brokerage platform.
Advisors associated with Independent RIAs retain 100% of their advisory fees, and in return, we charge separate fees for custody, trading, administrative and support services. In addition, some financial advisors associated with Independent RIAs carry their brokerage license with LPL Financial and access our fully-integrated brokerage platform under standard terms.
Advisors associated with Independent RIAs retain 100% of their advisory fees, and in return, we charge separate fees for custody, trading, administrative and support services. In addition, some financial advisors associated with Independent RIAs are registered representatives of LPL Financial and access our fully-integrated brokerage platform under standard terms.
Broker-dealers are subject to rules and regulations covering all aspects of the securities business, including sales and trading practices, public offerings, publication of research reports, use and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping and reporting, the conduct of directors, officers and employees, qualification and licensing of supervisory and sales personnel, marketing practices, supervisory and organizational 9 Table of Content s procedures intended to ensure compliance with securities laws and to prevent improper trading on material nonpublic information, limitations on extensions of credit in securities transactions, clearance and settlement procedures and rules designed to promote high standards of commercial honor and just and equitable principles of trade.
Broker-dealers are subject to rules and regulations covering all aspects of the securities business, including sales and trading practices, public offerings, publication of research reports, use and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping and reporting, the conduct of directors, officers and employees, qualification and licensing of supervisory and sales personnel, marketing practices, supervisory and organizational procedures intended to ensure compliance with securities laws and to prevent improper trading on material nonpublic information, limitations on extensions of credit in securities transactions, clearance and settlement procedures, anti-money laundering, cybersecurity, credit risk management and rules designed to promote high standards of commercial honor and just and equitable principles of trade.
Independent RIAs operate 2 Table of Content s pursuant to the Investment Advisers Act of 1940, as amended (the “Advisers Act”), or their respective states’ investment advisory licensing rules. These Independent RIAs engage us for technology, clearing and custody services, as well as access to our investment platforms.
Independent RIAs operate pursuant to the Investment Advisers Act of 1940, as amended (the “Advisers Act”), or their respective states’ investment advisory licensing rules. These Independent RIAs engage us for technology, clearing and custody services, as well as access to our investment platforms and business services.
The DOL also signaled its intent to further amend the definition of “fiduciary” under ERISA and the Code and certain of its existing prohibited transaction exemptions, which we expect, if completed, to result in increased legal, compliance, information technology and other costs and could lead to a greater risk of client lawsuits and enforcement activity by the DOL and other regulators.
The DOL also proposed amendments to the definition of “fiduciary” under ERISA and the Code and certain of its existing prohibited transaction exemptions, which we expect, if completed, to result in increased legal, compliance, information technology and other costs and could lead to a greater risk of client lawsuits and enforcement activity by the DOL and other regulators.
As of December 31, 2022, the total advisory assets under custody in these platforms, through both our corporate RIA and Independent RIA advisory platforms, were $583.1 billion. Commission-Based Products Commission-based products include those for which we and our advisors receive an upfront commission and, for certain products, a trailing commission.
As of December 31, 2023, the total advisory assets under custody in these platforms, through both our corporate RIA and Independent RIA advisory platforms, were $735.8 billion. Commission-Based Products Commission-based products include those for which we and our advisors receive an upfront commission and, for certain products, a trailing commission.
We require all of our employees to complete courses in key regulatory areas, such as insider trading and anti-money laundering compliance, and we offer professional development opportunities through training sessions and cross-departmental workshops, resulting in over 140,000 completed courses and workshops and approximately 134,000 development hours for our employees .
We require all of our employees to complete courses in key regulatory areas, such as insider trading and anti-money laundering compliance, and we offer professional development opportunities through training sessions, on-demand learning and cross-departmental workshops, resulting in over 170,000 completed courses and workshops and approximately 200,000 development hours for our employees .
We offer integrated technology solutions, brokerage and advisory platforms, clearing services, compliance services, consultative practice management programs and training, business services and planning and advice services, and in-house research to help our advisors run successful businesses.
Through our comprehensive platform, we offer integrated technology solutions; brokerage and advisory platforms; clearing, compliance, business and planning and advice services; consultative practice management programs and training; and in-house research to help our advisors deliver advice to their clients and run successful businesses.
It is unclear how and whether other regulators, including banking regulators, and state securities and insurance regulators, may respond to or attempt to enforce similar issues addressed by Reg BI and PTE 2020-02.
It is unclear how and whether other regulators, including banking regulators, and state securities and insurance regulators, may respond to or attempt to enforce similar issues addressed by Reg BI and the DOL.
As of December 31, 2022, the total brokerage assets in commission-based products were $527.7 billion. Client Cash Programs Our client cash programs include two Federal Deposit Insurance Corporation (“FDIC”) insured bank sweep vehicles, a client cash account and a money market account, which enable our advisors to manage their clients’ cash balances.
As of December 31, 2023, the total brokerage assets in commission-based products were $618.2 billion. 4 Table of Contents Client Cash Programs Our client cash programs include two Federal Deposit Insurance Corporation (“FDIC”) insured bank sweep vehicles, a client cash account and a money market account, which enable our advisors to manage their clients’ cash balances.
This new interpretation, as well as other guidance issued by the DOL in connection with this interpretation, is the subject of multiple litigations in federal district courts challenging the DOL’s authority to issue it.
This new 10 Table of Contents interpretation, as well as other guidance issued by the DOL in connection with this interpretation, has been the subject of multiple litigations in federal district courts challenging the DOL’s authority to issue it.
Investment Adviser Regulation As investment advisers registered with the SEC, our subsidiaries LPL Financial and Fortigent, LLC are subject to the requirements of the Advisers Act, and the regulations promulgated thereunder, including examination by the SEC’s staff.
Investment Adviser Regulation As an investment adviser registered with the SEC, our subsidiary LPL Financial is subject to the requirements of the Advisers Act, and the regulations promulgated thereunder, including examination by the SEC’s staff.
Recruiting As a Fortune 500 company focused on innovation and growth, talent drives the success of our company. Therefore, we are focused on attracting, developing and retaining our employees. To reach a diverse pool of potential talent, we are continually in the market and take a multi-faceted approach to recruiting in pursuit of diverse, entrepreneurial and dedicated team members.
Therefore, we are focused on attracting and retaining our employees. To reach a diverse pool of talent, we are continually in the market and take a multi-faceted approach to recruiting in pursuit of diverse, entrepreneurial and dedicated team members.
(& Design) are among our service marks. 12 Table of Content s
(& Design) are among our service marks. 12 Table of Contents
In addition, we host certain advisor conferences that serve as training, education, sales and marketing events for which we charge sponsors a fee. • Our operating model is scalable and is capable of delivering expanding profit margins over time. • We have managed our capital allocation framework and expenditures such that we have been able to both invest in our business and return capital to stockholders. 5 Table of Content s Our Competitive Strengths Market Leadership Position and Scale We are the established leader in the independent advisor market, which is our core business focus.
In addition, we host certain advisor conferences that serve as training, education, sales and marketing events for which we charge sponsors a fee. • Our operating model is scalable and is capable of delivering expanding profit margins over time. • We have managed our capital allocation framework and expenditures such that we have been able to both invest in our business and return capital to stockholders.
Our team of risk and compliance employees assists our advisors through: • training and advising advisors on new products, new regulatory guidelines, compliance and risk management tools, security policies and procedures and best practices; • advising on sales practice activities and facilitating the supervision of activities by branch managers; • conducting technology-enabled surveillance of trading activities and sales practices; • monitoring of registered investment advisory activities for advisors on our corporate RIA platform; and • inspecting branch offices and advising on how to strengthen compliance procedures. 3 Table of Content s Consultative Practice Management Programs and Training Our practice management programs are designed to help leaders and financial advisors in independent practices and enterprises enhance and grow their businesses.
Our team of risk and compliance employees assists our advisors through: • training and advising advisors on new products, new regulatory guidelines, compliance and risk management tools, security policies and procedures and best practices; • advising on sales practice activities and facilitating the supervision of activities by branch managers; • conducting technology-enabled surveillance of trading activities and sales practices; • monitoring of registered investment advisory activities for advisors on our corporate RIA platform; and • inspecting branch offices and advising on how to strengthen compliance procedures.
Professional services offerings, including CFO Solutions, Marketing Solutions, Admin Solutions, Bookkeeping and Partial Book Sales, are digital and employee-powered solutions that provide practice management expertise to support growth and operational efficiency.
Professional services offerings, including CFO Solutions, Marketing Solutions, Admin Solutions, Advisor Institute, Bookkeeping, Partial Book Sales, and CFO Essentials are digital and employee-powered solutions that provide expertise to increase business-level growth and operational efficiency.
(“PTC”) provides trust administration, investment management oversight and, along with its affiliate Fiduciary Trust Company of New Hampshire, Individual Retirement Account (“IRA”) custodial services. • LPL Employee Services, LLC and its subsidiary, Allen & Company of Florida, LLC (“Allen & Company”), along with their affiliate, Financial Resources Group Investment Services, LLC (“FRGIS”) provide primary support for the Company’s employee advisor affiliation model. 1 Table of Content s Our Strategy At LPL, our mission is to take care of our advisors so they can take care of their clients.
(“PTC”) provides trust administration, investment management oversight and, along with its affiliate Fiduciary Trust Company of New Hampshire, Individual Retirement Account (“IRA”) custodial services. • LPL Employee Services, LLC and its subsidiary, Allen & Company of Florida, LLC (“Allen & Company”), along with their affiliate, Financial Resources Group Investment Services, LLC (“FRGIS”), provide primary support for the Company’s employee advisor affiliation model.
In December 2020, the DOL finalized PTE 2020-02, providing broad exemptive relief for receiving variable or transaction-based compensation, and certain other “prohibited transactions,” in connection with fiduciary investment advice to investors using covered accounts if certain conditions are met.
The DOL’s prohibited transaction exemption 2020-03 (“PTE 2020-02”) provides broad exemptive relief for receiving variable or transaction-based compensation, and certain other “prohibited transactions,” in connection with fiduciary investment advice to investors using covered accounts if certain conditions are met.
The Company’s most significant wholly owned subsidiaries are described below: • LPL Holdings, Inc. is a direct subsidiary of LPL Financial Holdings Inc. and is an intermediate holding company of our business. • LPL Financial LLC (“LPL Financial”) is a clearing broker-dealer and an investment adviser that clears and settles customer transactions. • Fortigent Holdings Company, Inc. and its subsidiaries (“Fortigent”) provide solutions and consulting services to RIAs, banks and trust companies serving high-net-worth clients. • LPL Insurance Associates, Inc.
The Company’s most significant wholly owned subsidiaries are described below: • LPL Holdings, Inc. is a direct subsidiary of LPL Financial Holdings Inc. and is an intermediate holding company of our business. • LPL Financial LLC (“LPL Financial”) is a clearing broker-dealer and an investment adviser that clears and settles customer transactions. • LPL Insurance Associates, Inc.
The majority of our advisors are independent practitioners who are primarily located in rural and suburban areas and, as such, are viewed as local providers of independent advice. Many of our advisors operate under their own business name, and we may assist these advisors with their branding, marketing and promotion and regulatory review.
The majority of our advisors are independent practitioners who are viewed as local providers of independent advice. Many of our advisors operate under their own business name, with LPL offering assistance with their branding, marketing and promotion and regulatory review.
Our focus is working alongside advisors to navigate complex environments in order to create the best outcomes for their clients. We believe we offer a compelling value proposition to independent financial advisors and enterprises.
We make meaningful investments to support the growth, productivity and efficiency of advisors across a broad spectrum of models as their practices evolve. Our focus is working alongside advisors to navigate complex environments in order to create the best outcomes for their clients. We believe we offer a compelling value proposition to independent financial advisors and enterprises.
We also support advisors through our independent employee advisor affiliation model, where they benefit from a full-service employee relationship while generally retaining ownership of their clients.
We also support advisors through our independent employee advisor affiliation model, where they benefit from a full-service employee relationship with us while generally retaining ownership of their client relationships in exchange for a slightly lower payout than our traditional independent model.
Anti-Money Laundering and Sanctions Compliance The USA PATRIOT Act of 2001, which amended the Bank Secrecy Act, contains anti-money laundering and financial transparency laws and mandates the implementation of various regulations applicable to broker-dealers, futures commission merchants and other financial services companies.
LPL Financial, which is subject to net capital rules, has been and currently is in compliance with those rules and has net capital in excess of the minimum requirements. 11 Table of Contents Anti-Money Laundering and Sanctions Compliance The USA PATRIOT Act of 2001, which amended the Bank Secrecy Act, contains anti-money laundering and financial transparency laws and mandates the implementation of various regulations applicable to broker-dealers, futures commission merchants and other financial services companies.
The rules of the Municipal Securities Rulemaking Board, which are enforced by the SEC and FINRA, apply to the municipal securities activities of LPL Financial. LPL Financial is registered as an introducing broker-dealer with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”).
LPL Financial is registered as an introducing broker-dealer with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). LPL Financial is regulated by the SEC, FINRA, CFTC and NFA.
Employee Safety We aim to provide a safe, inclusive environment for our employees where they feel engaged in our business, supported in who they are and empowered to succeed.
Lastly, we have created skills cards with curated content targeting key skills and desired capabilities to help employees develop. Employee Safety We aim to provide a safe, inclusive environment for our employees where they feel engaged in our business, supported in who they are and empowered to succeed.
We are committed to providing a workplace that is free from violence, harassment and other unsafe or disruptive conditions and require our personnel to attend regular training sessions and workshops on those topics. To promote health and safety in our workplace, we implemented a work-from-home-or-office practice that enables employees in many positions to choose whether to work remotely and/or on-site.
We are committed to providing a workplace that is free from violence, harassment and other unsafe or disruptive conditions and require our personnel to attend regular training sessions and workshops on those topics.
We use our scale and position as an industry leader to champion the independent business model and the rights of our advisors and their clients.
Our Competitive Strengths Market Leadership Position and Scale We are the established leader in the independent advisor market, which is our core business focus. We use our scale and position as an industry leader to champion the independent business model and the rights of our advisors and their clients.
We expect to facilitate these productivity improvements by helping our advisors better manage their practices in an increasingly complex external environment, which we believe has 6 Table of Content s the potential to result in the assets per advisor growing over time.
We expect to facilitate these productivity improvements by helping our advisors better manage their practices in an increasingly complex external environment, which we believe has the potential to result in the assets per advisor growing over time. Business services and planning and advice services are a source of organic growth as a larger share of advisors adopts these service solutions.
On June 30, 2020, the SEC’s new standard of conduct applicable to retail brokerage accounts (“Reg BI”) became applicable. Reg BI requires that broker-dealers act in the best interest of retail customers without placing their own financial or other interests ahead of the customer’s and imposes new obligations related to disclosure, duty of care, conflicts of interest and compliance.
Reg BI requires that, when making recommendations, broker-dealers act in the best interest of retail 9 Table of Contents customers without placing their own financial or other interests ahead of the customer’s and imposes obligations related to disclosure, duty of care, conflicts of interest and compliance.
Business optimizer offerings, including M&A Solutions, Digital Office, Resilience Plans and Assurance Plans, are digital solutions that provide risk mitigation and business continuity services to support practice operations and succession planning. Planning and advice services were launched in January of 2022 and are digital and employee-powered solutions that help advisors expand the breadth and depth of their advice.
Business optimizer offerings, including M&A Solutions, Digital Office, Resilience Plans and Assurance Plans, are digital solutions that provide risk mitigation and business continuity services to support practice operations and succession planning.
In-House Research We provide our advisors with integrated access to comprehensive research on a broad range of investments. We share market analysis and commentary on macro-economic events, manager research, capital markets assumptions, strategic and tactical asset allocation advice and individual equity guidance.
We share market analysis and commentary on macro-economic events, manager research, capital markets assumptions, strategic and tactical asset allocation advice and individual equity guidance.
Our vision is to become the leader across the advisor-mediated marketplace by empowering advisors to deliver great advice to their clients and be great operators of their businesses.
Our Strategy At LPL, our mission is to take care of our advisors so they can take care of their clients. Our vision is to become the leader across the advisor-mediated marketplace by empowering advisors to deliver advice to their clients and operate thriving businesses.
The combination of our ability to reinvest in our business and maintain highly competitive payout rates has enabled us to attract and retain advisors. This, in turn, has driven our growth and led to a continuous cycle of reinvestment that reinforces our established scale advantage.
The combination of our ability to reinvest in our business and maintain highly competitive payout rates has enabled us to attract and retain advisors.
On June 29, 2020, the DOL officially reinstated its “five-part test” defining fiduciary “investment advice” under ERISA and the Code (the “Five-Part Test”).
The DOL has a “five-part test” defining fiduciary “investment advice” under ERISA and the Code (the “Five-Part Test”).
Our advisors are a community of diverse, entrepreneurial financial services professionals who support approximately 7.9 million client accounts. They build long-term relationships with their clients in communities across the United States by guiding them through the complexities of investment decisions, retirement solutions, financial planning, and wealth management.
They build long-term relationships with their clients in communities across the United States by guiding them through the complexities of investment decisions, retirement solutions, financial planning and wealth management. Our services are designed to support the evolution of our advisors’ businesses over time and to adapt as our advisors’ needs change.
Compliance with all applicable laws and regulations, only some of which are described below, involves a significant investment in time and resources. Any new laws or regulations applicable to our business, any changes to existing laws or regulations, or any changes to the interpretations or enforcement of those laws or regulations may affect our operations and/or financial condition.
Any new laws or regulations applicable to our business, any changes to existing laws or regulations, or any changes to the interpretations or enforcement of those laws or regulations may affect our operations and/or financial condition.
Diversity, Equity and Inclusion Our diversity, equity and inclusion (“DEI”) efforts are overseen by our chief executive officer, chief human capital officer and chief diversity officer. In 2022, the management committee received quarterly updates on these metrics, 8 Table of Content s and they approved a requested financial investment in our DEI program.
Diversity, Equity and Inclusion Our diversity, equity and inclusion (“DEI”) efforts are overseen by our chief executive officer, chief human capital officer and chief diversity officer. In 2023, the management committee received quarterly updates on DEI-related issues.
We continued our partnership and participation in the McKinsey Black Leadership Academy and expanded participation in the McKinsey Asian Leadership Academy and the McKinsey Hispanic/Latin Leadership Academy in 2022. Regulation The financial services industry is subject to extensive regulation by U.S. federal, state, and international government agencies as well as various self-regulatory organizations.
Regulation The financial services industry is subject to extensive regulation by U.S. federal, state and international government agencies as well as various self-regulatory organizations. We seek to participate in the development of significant rules and regulations that govern our industry.
In December 2020, the DOL finalized a new Prohibited Transaction Exemption 2020-02 (“PTE 2020-02”) that expanded instances where an investment advice fiduciary can receive additional compensation on transactions as a result of fiduciary recommendations to a plan covered by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), IRA or other account covered by Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”).
In addition, the DOL has proposed a “Retirement Security Rule” that would broaden the definition of fiduciary advice and modify the prohibited transaction exemptions in effect as of the date of this Annual Report that enable investment advice fiduciaries to receive compensation on transactions as a result of fiduciary recommendations to a plan covered by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), IRA or other account covered by Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”).
LPL Financial is registered as a broker-dealer in each of the 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. FRGIS is registered with the SEC, a member of FINRA, and registered as a broker-dealer in New Jersey, South Carolina, and New York.
LPL Financial is registered as a broker-dealer in each of the 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The rules of the Municipal Securities Rulemaking Board, which are enforced by the SEC and FINRA, apply to the municipal securities activities of LPL Financial.
Our Business Advisor Relationships Our business is dedicated exclusively to our advisors; we are not a market-maker nor do we offer investment banking or underwriting services. We offer no proprietary products of our own, and, as a result, we enable the independent financial advisors and enterprises that we support to offer their clients lower-conflict advice.
Our Business Advisor Relationships Our business is dedicated exclusively to our advisors; we are not a market-maker nor do we offer investment banking or underwriting services.
Competition We compete with a variety of financial firms to attract and retain experienced and productive advisors.
Related investments in our enterprise platform have generated interest from new enterprise clients. 6 Table of Contents Competition We compete with a variety of financial firms to attract and retain experienced and productive advisors.
We seek to participate in the development of significant rules and regulations that govern our industry. We have been investing in our compliance functions to monitor our adherence to the numerous legal and regulatory requirements applicable to our business.
We have been investing in our compliance functions to monitor our adherence to the numerous legal and regulatory requirements applicable to our business. Compliance with all applicable laws and regulations, only some of which are described below, involves a significant investment in time and resources.
These laws and regulations are designed to serve specific bank regulatory and supervisory purposes and are not meant for the protection of PTC, PTC Holdings, Inc., LPLFH or their stockholders. 11 Table of Content s Regulatory Capital Requirements The SEC, FINRA, CFTC and NFA have stringent rules and regulations with respect to the maintenance of specific levels of net capital by regulated entities.
Regulatory Capital Requirements The SEC, FINRA, CFTC and NFA have stringent rules and regulations with respect to the maintenance of specific levels of net capital by regulated entities.
Our health and welfare benefits include, among other things: medical coverage; dental and vision coverage; healthcare and dependent-care flexible spending accounts; Health Savings Accounts; accident and critical illness coverage; life and accidental death and dismemberment insurance; short-term and long-term disability insurance; and the LPL Live Well employee wellbeing program, which includes a mental health support program with quick access to therapy and counseling.
Our health and welfare benefits include, among other things: medical coverage; dental and vision coverage; healthcare and dependent-care flexible spending accounts; Health Savings Accounts; accident and critical illness coverage; life and accidental death and dismemberment insurance; short-term and long-term disability insurance; and the LPL Live Well employee wellbeing program, which supports employees and their family members in their wellness journeys as well as offering targeted and focused programming for mental health, Type 2 Diabetes care and maternity management. 7 Table of Contents Recruiting As a Fortune 500 company focused on innovation and growth, talent drives the success of our company.
We work alongside advisors to navigate complex market and regulatory environments and strive to empower them to create the best outcomes for investors. In addition, we make meaningful investments in technology and services to support the growth, productivity and efficiency of advisors across a broad spectrum of business models as their practices evolve.
In addition, we make meaningful investments in technology and services to support the growth, productivity and efficiency of advisors across a broad spectrum of business models as their practices evolve. Our advisors are a community of diverse financial services professionals who support approximately 8.3 million client accounts.
Ongoing investment in and enhancements to our platform and support teams have led to an expanded pipeline. We have also experienced momentum from a continued expansion of our advisor affiliation models, which has attracted prospects from new sources. Finally, we have opened up a new market with our newest enterprise affiliation model.
We have also experienced momentum from a continued expansion of our advisor affiliation models, which has attracted prospects from new sources.
LPL Financial also supports over 500 independent RIA firms that conduct their business through separate registered investment advisor firms (“Independent RIAs”) with approximately 5,800 advisors who conduct their advisory business through these separate entities, rather than through our corporate RIA.
These advisors also agree not to engage in any outside business activity without prior approval from us and not to act in competition with us. LPL Financial also supports approximately 570 independent RIA firms that conduct their business through separate registered investment advisor firms (“Independent RIAs”) with approximately 6,300 advisors who conduct their advisory business through these separate entities.
The focus of planning and advice services is helping advisors increase marketplace differentiation while limiting additional complexity and risk. We are expanding our portfolio of services to address new advisor needs while also enhancing our existing solutions to deliver an industry-leading customer experience.
We are expanding our portfolio of services to address new advisor needs while also enhancing our existing solutions to deliver an industry-leading customer experience. In-House Research We provide our advisors with integrated access to comprehensive research on a broad range of investments.
In general, an acquisition of 10% or more of our common stock, or another acquisition of “control” as defined in OCC regulations, may require OCC approval.
In general, an acquisition of 10% or more of our common stock, or another acquisition of “control” as defined in OCC regulations, may require OCC approval. These laws and regulations are designed to serve specific bank regulatory and supervisory purposes and are not meant for the protection of PTC, PTC Holdings, Inc., LPLFH or their stockholders.
In addition, our Board of Directors (the “Board”) also received updates during regularly scheduled quarterly meetings. We believe that well-being is more than just physical safety and that our employees should feel welcome and supported as who they are. We seek to foster diversity and a culture of inclusivity.
Our Board of Directors, its compensation and human resources committee and its nominating and governance committee, which oversees our environmental, social and governance program, also received multiple updates on our progress in this area. At LPL, we believe that well-being is more than just physical safety and that our employees should feel welcome and supported as who they are.
This resulted in relationships with M&T Bank Corporation and BMO Harris Financial Advisors that we began during 2021 and the onboarding of CUNA Brokerage Services, Inc. and People’s United Bank in 2022. Related investments in our enterprise platform have generated interest from new enterprise clients.
Finally, we have opened up a new market with our newest enterprise affiliation model resulting in strategic relationships with M&T Bank Corporation, BMO Harris Financial Advisors, CUNA Brokerage Services, Inc., People’s United Bank, Bancwest Investment Services and Commerce Financial Advisors.
Business services and planning and advice services are a source of organic growth as a larger share of advisors adopts these service solutions. Attracting New Assets to Our Platform We intend to grow the assets served by our platform across traditional markets and through new affiliation models.
Attracting New Assets to Our Platform We intend to grow the assets served by our platform across traditional markets and through new affiliation models. Ongoing investment in and enhancements to our platform and support teams have led to an expanded pipeline.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMaterial risks that may adversely affect our business, operations and financial results include, but are not limited to, the following: Risks Related to Our Business and Industry • We depend on our ability to attract and retain experienced and productive advisors, and we are subject to competition in all aspects of our business. • Our financial condition and results of operations may be adversely affected by market fluctuations and other economic factors. • Significant interest rate changes could affect our profitability and financial condition. • Any damage to our reputation could harm our business and lead to a loss of revenue and net income. • Our business is subject to risks related to litigation, arbitration claims and regulatory actions. • There are risks inherent in the independent broker-dealer business model. • We rely on third-party service providers, including off-shore providers, to perform technology, processing and support functions, and our operations are dependent on financial intermediaries that we do not control. • Lack of liquidity or access to capital could impair our business and financial condition. • Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments. • Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risks. • We face competition in attracting and retaining key talent. • The securities settlement process exposes us to risks related to adverse movements in price. • Our indebtedness could adversely affect our financial condition and may limit our ability to use debt to fund future capital needs. • Restrictions under our Credit Agreement and the Indentures governing our senior unsecured notes (the “Notes”) may prevent us from taking actions that we believe would be in the best interest of our business. • Provisions of our Credit Agreement and the Indentures could discourage an acquisition of us by a third-party. • Our insurance coverage may be inadequate or expensive. • Poor service or performance of the financial products that we offer or competitive pressures on pricing of such services or products may cause clients of our advisors to withdraw their assets on short notice. • A loss of our marketing relationships with manufacturers of financial products could harm our relationship with our advisors and, in turn, their clients. • Changes in U.S. federal income tax law could make some of the products distributed by our advisors less attractive to clients. • The effects of the COVID-19 pandemic have negatively affected the global economy, the U.S. economy and global financial markets, and may disrupt our operations.
Biggest changeMaterial risks that may adversely affect our business, operations and financial results include, but are not limited to, the following: Risks Related to Our Business and Industry • We depend on our ability to attract and retain experienced and productive advisors, and we are subject to competition in all aspects of our business. • Our financial condition and results of operations may be adversely affected by market fluctuations and other economic factors. • Significant interest rate changes could affect our profitability and financial condition. • Any damage to our reputation could harm our business and lead to a loss of revenue and net income. • Our business is subject to risks related to litigation, arbitration claims and regulatory actions. • There are risks inherent in the independent broker-dealer business model. • We rely on third-party service providers, including off-shore providers, to perform technology, processing and support functions, and our operations are dependent on financial intermediaries that we do not control. • Lack of liquidity or access to capital could impair our business and financial condition. • Our business could be materially adversely affected as a result of the risks associated with acquisitions, investments, and strategic relationships. • Our risk management policies and procedures may not be fully effective in mitigating our risk exposure in all market environments or against all types of risks. • We face competition in attracting and retaining key talent. • The securities settlement process exposes us to risks related to adverse movements in price. • Our indebtedness could adversely affect our financial condition and may limit our ability to use debt to fund future capital needs. • Restrictions under our Credit Agreement may prevent us from taking actions that we believe would be in the best interest of our business. • Provisions of our Credit Agreement and certain of the Indentures could discourage an acquisition of us by a third-party. • Our insurance coverage may be expensive and we may exceed our limits of insurance coverage. • Poor service or performance of the financial products that we offer or competitive pressures on pricing of such services or products may cause clients of our advisors to withdraw their assets on short notice. • A loss of our marketing relationships with manufacturers of financial products could harm our relationship with our advisors and, in turn, their clients. • Changes in U.S. federal income tax law could make some of the products distributed by our advisors less attractive to clients.
The market for experienced and productive advisors is highly competitive, and we devote significant resources to attracting and retaining well-qualified advisors. In attracting and retaining advisors, we compete directly with a variety of financial institutions such as wirehouses, regional broker-dealers, banks, insurance companies, other independent broker-dealers and independent RIA firms.
The market for experienced and productive advisors is highly competitive, and we devote significant resources to attracting and retaining well-qualified advisors. In attracting and retaining advisors, we compete directly with a variety of financial institutions such as wirehouses, regional broker-dealers, banks, insurance companies, other independent broker-dealers and RIA firms.
For example, we have an agreement with Refinitiv US LLC, under which it provides us key operational support, including data processing services for securities transactions and back office processing support (“BETAHost”). Our use of third-party service providers may decrease our ability to control operating risks and information technology systems risks.
For example, we have an agreement with Refinitiv US LLC (“BETAHost”), under which it provides us key operational support, including data processing services for securities transactions and back office processing support. Our use of third-party service providers may decrease our ability to control operating risks and information technology systems risks.
The CFTC has designated the NFA as LPL Financial’s primary regulator for futures and commodities trading activities. The SEC, FINRA, DOL, CFTC, OCC, various securities and futures exchanges and other United States and state-level governmental or regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws, regulations or interpretations.
The CFTC has designated the NFA as LPL Financial’s primary regulator for futures and commodities trading activities. The SEC, FINRA, DOL, CFTC, NFA, OCC, various securities and futures exchanges and other United States and state-level governmental or regulatory authorities continuously review legislative and regulatory initiatives and may adopt new or revised laws, regulations or interpretations.
Some potential conditions that could negatively affect our liquidity include: • illiquid or volatile markets; • diminished access to debt or capital markets; • unforeseen cash or capital requirements; • actual or alleged events of default under our Credit Agreement, Broker-Dealer Revolving Credit Facility or other agreements governing our indebtedness; • regulatory penalties or fines, settlements, customer restitution or other remediation costs; or • adverse legal settlements or judgments.
Some potential conditions that could negatively affect our liquidity include: • illiquid or volatile markets; • diminished access to debt or capital markets; • unforeseen cash or capital requirements; • actual or alleged events of default under our Credit Agreement, Broker-Dealer Revolving Credit Facility, Indentures or other agreements governing our indebtedness; • regulatory penalties or fines, settlements, customer restitution or other remediation costs; or • adverse legal settlements or judgments.
Moreover, new and developing state and federal regulatory requirements with respect to standards of care and other obligations, as discussed under “ Risks Related to Our Regulatory Environment” below, may introduce new grounds for legal claims or enforcement actions against us in the future, including, in particular with respect to our brokerage services.
Moreover, new and developing state and federal regulatory requirements with respect to standards of care and other obligations, as discussed under “ Risks Related to Our Regulatory Environment” below, may introduce new grounds for legal claims or enforcement actions against us in the future, in particular with respect to our brokerage services.
The impacts, degree and timing of the effect of these laws and future regulations on our business cannot now be anticipated or planned for, and may have further impacts on our products and services and the results of operations. Please consult the “Retirement Plan Services Regulation” section within Part I, “Item 1.
The impacts, degree and timing of the effect of these laws and future regulations on our business cannot now be anticipated or planned for, and may have further impacts on our products and services and the results of operations. Consult the “Retirement Plan Services Regulation” section within Part I, “Item 1.
A large operating loss or charge against net capital could also adversely affect our ability to expand or even maintain our present levels of business. Failure to comply with ERISA regulations and certain tax-qualified plan laws and regulations could result in penalties against us.
A large operating loss or charge against net capital could also adversely affect our ability to expand or maintain our present levels of business. Failure to comply with ERISA regulations and certain tax-qualified plan laws and regulations could result in penalties against us.
If one or more of these events occur, they could jeopardize our own, our advisors’ or their clients’, or our counterparties’ confidential and other information processed, stored in and transmitted through our computer systems and networks, or otherwise cause interruptions or malfunctions in our own, our advisors’ or their clients’, our counterparties’, or third parties’ operations.
If one or more of these events occur, they could jeopardize our own, our advisors’ or their clients’, or our counterparties’ confidential and other proprietary information processed, stored in and transmitted through our computer systems and networks, or otherwise cause interruptions or malfunctions in our own, our advisors’ or their clients’, our counterparties’, or third parties’ operations.
If we violate any of these covenants or covenants under our Broker-Dealer Revolving Credit Facility and are unable to obtain waivers, we would be in default under our Credit Agreement, the Indentures or the Broker-Dealer Revolving Credit Facility, as applicable.
If we violate any of these covenants or covenants under our Broker-Dealer Revolving Credit Facility and are unable to obtain waivers, we would be in default under our Credit Agreement or the Broker-Dealer Revolving Credit Facility, as applicable.
In addition to better serving our advisors and their clients, the effective use of technology increases efficiency and enables firms like ours to reduce costs and support our regulatory compliance and reporting functions.
In addition to better serving our advisors and their clients, the effective use of technology increases efficiency and enables firms like ours to reduce costs, support our regulatory compliance and reporting functions, and better serve advisors and their clients.
Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks, including personally identifiable information of advisors and their clients, as well as our employees.
Our operations rely on the secure processing, storage and transmission of confidential and other proprietary information in our computer systems and networks, including personally identifiable information of advisors and their clients, as well as our employees.
Violations of laws, rules or regulations and settlements in respect of alleged violations have in the past resulted in, and could in the future result in, legal liability, censures, penalties and fines, disgorgement of profits, restitution to customers, remediation, the issuance of cease-and-desist orders or injunctive or other equitable relief against us, which individually or in the aggregate could negatively impact our financial results or adversely affect our ability to attract or retain financial advisors and enterprises.
Violations of laws, rules or regulations and settlements in respect of alleged violations have in the past resulted in, and could in the future result in, legal liability, censures, penalties and fines, disgorgement of profits, restitution to customers, remediation, the issuance of cease-and-desist orders or injunctive or other equitable relief against us, which individually or in the aggregate could negatively impact our financial results or adversely affect our ability to attract or retain financial advisors and institutions.
The market price of our common stock may fluctuate substantially due to the following factors (in addition to the other risk factors described in this Item 1A ): • actual or anticipated fluctuations in our results of operations, including with regard to interest rates or revenue associated with our client cash programs; • variance in our financial performance from the expectations of equity research analysts; • conditions and trends in the markets we serve; • announcements of significant new services or products by us or our competitors; • additions or changes to key personnel; • the commencement or outcome of litigation or arbitration proceedings; • the commencement or outcome of regulatory actions, including settlements with the SEC, FINRA, DOL or state securities regulators; • changes in market valuation or earnings of our competitors; 28 Table of Content s • the trading volume of our common stock; • future sales of our equity securities; • changes in the estimation of the future size and growth rate of our markets; • legislation or regulatory policies, practices or actions, including developments related to the “best interest” and “fiduciary” standards of care; • political developments; and • general economic conditions.
The market price of our common stock may fluctuate substantially due to the following factors (in addition to the other risk factors described in this Item 1A ): • actual or anticipated fluctuations in our results of operations, including with regard to interest rates or revenue associated with our client cash programs; • variance in our financial performance from the expectations of equity research analysts; • conditions and trends in the markets we serve; • announcements of significant new services or products by us or our competitors; • additions or changes to key personnel; • the commencement or outcome of litigation or arbitration proceedings; • the commencement or outcome of regulatory actions, including settlements with the SEC, FINRA, DOL or state securities regulators; • changes in market valuation or earnings of our competitors; • the trading volume of our common stock; • future sales of our equity securities; • changes in the estimation of the future size and growth rate of our markets; • legislation or regulatory policies, practices or actions, including developments related to the “best interest” and “fiduciary” standards of care; • political developments; and • general economic conditions.
Further, such negative outcomes individually or in the aggregate may cause us significant reputational harm and could have a material adverse effect on our ability to recruit or retain financial advisors or enterprises, or our results of operations, cash flows or financial condition. We may face liabilities for deficiencies or failures in our supervisory and regulatory compliance systems and programs.
Further, such negative outcomes individually or in the aggregate may cause us significant reputational harm and could have a material adverse effect on our ability to recruit or retain financial advisors or institutions, or our results of operations, cash flows or financial condition. We may face liabilities for deficiencies or failures in our supervisory and regulatory compliance systems and programs.
The securities settlement process exposes us to risks related to adverse movements in price. LPL Financial provides clearing services and trade processing for our advisors and their clients and certain enterprises. Broker-dealers that clear their own trades are subject to substantially more regulatory requirements than brokers that outsource these functions to third-party providers.
The securities settlement process exposes us to risks related to adverse movements in price. LPL Financial provides clearing services and trade processing for our advisors and their clients and certain institutions. Broker-dealers that clear their own trades are subject to substantially more regulatory requirements than brokers that outsource these functions to third-party providers.
More broadly, we are subject to competition in all aspects of our business from: • brokerage and investment advisory firms, including national and regional firms, as well as independent RIA firms; • asset management firms; • commercial banks and thrift institutions; • insurance companies; • other clearing/custodial technology companies; and • investment firms offering so-called “robo” advice solutions.
More broadly, we are subject to competition in all aspects of our business from: • brokerage and investment advisory firms, including national and regional firms, as well as Independent RIAs; • asset management firms; • commercial banks and thrift institutions; • insurance companies; • other clearing/custodial technology companies; and • investment firms offering so-called “robo” advice solutions.
This application process is time-consuming and may not be successful. As a result, we may be prevented from entering new potentially profitable businesses in a timely manner, or at all. In addition, as a member of FINRA, we are subject to certain regulations regarding changes in control.
This application process is time-consuming and may not be successful. As a result, we may be prevented from entering into or acquiring new potentially profitable businesses in a timely manner, or at all. In addition, as a member of FINRA, we are subject to certain regulations regarding changes in control.
As a result, payment of the indebtedness could be accelerated, which may permit acceleration of indebtedness under other agreements that contain cross-default or cross-acceleration provisions. If our indebtedness is accelerated, we may not be able to repay that indebtedness or borrow sufficient funds to refinance it.
As a result, payment of the indebtedness could be accelerated, which may permit acceleration of indebtedness under the Indentures and other agreements that contain cross-default or cross-acceleration provisions. If our indebtedness is accelerated, we may not be able to repay that indebtedness or borrow sufficient funds to refinance it.
Our Credit Agreement and the Indentures contain customary restrictions on our activities, including covenants that may restrict us from: • incurring additional indebtedness or issuing disqualified stock or preferred stock; • declaring dividends or other distributions to stockholders; • repurchasing equity interests; • redeeming indebtedness that is subordinated in right of payment to certain debt instruments; • making investments or acquisitions; • creating liens; • selling assets; • guaranteeing indebtedness; • engaging in certain transactions with affiliates; • entering into agreements that restrict dividends or other payments from subsidiaries; and • consolidating, merging or transferring all or substantially all of our assets.
Our Credit Agreement contains customary restrictions on our activities, including covenants that may restrict us from: • incurring additional indebtedness or issuing disqualified stock or preferred stock; • declaring dividends or other distributions to stockholders; • repurchasing equity interests; • redeeming indebtedness that is subordinated in right of payment to certain debt instruments; • making investments or acquisitions; • creating liens; • selling assets; • guaranteeing indebtedness; • engaging in certain transactions with affiliates; • entering into agreements that restrict dividends or other payments from subsidiaries; and • consolidating, merging or transferring all or substantially all of our assets.
We continue our efforts to safeguard the data entrusted to us in accordance with the applicable laws and our internal data protection policies, including taking steps to reduce the potential for the improper use or disclosure of personal information.
We continue our efforts to safeguard the data entrusted to us in accordance with applicable law and our internal data protection policies, including taking steps to reduce the potential for the improper use or disclosure of personal information.
Changes in U.S. federal income tax law, in particular with respect to 21 Table of Content s variable annuity products, or with respect to tax rates on capital gains or dividends, could make some of these products less attractive to clients and, as a result, could have a material adverse effect on our business, results of operations, cash flows or financial condition.
Changes in U.S. federal income tax law, in particular with respect to variable annuity products, or with respect to tax rates on capital gains or dividends, could make some of these products less attractive to clients and, as a result, could have a material adverse effect on our business, results of operations, cash flows or financial condition.
Such activity could, among other things: • seriously damage our reputation; • allow competitors or hackers access to our proprietary business information; • subject us to liability for a failure to safeguard client data; • result in the termination of relationships with our advisors; • subject us to regulatory sanctions or obligations, based on state law or the authority of the SEC and FINRA to enforce regulations regarding business continuity planning or cybersecurity; 26 Table of Content s • subject us to litigation by consumers, advisors or other business partners that may suffer damages as a result of such activity; • result in inaccurate financial data reporting; and • require significant capital and operating expenditures to investigate and remediate a breach.
Such activity could, among other things: • damage our reputation; • allow competitors or hackers access to our proprietary business information; • subject us to liability for a failure to safeguard client data; • result in the termination of relationships with our advisors; • subject us to regulatory sanctions or obligations, based on state law or the authority of the SEC and FINRA to enforce regulations regarding business continuity planning or cybersecurity; • subject us to litigation by consumers, advisors or other business partners that may suffer damages as a result of such activity; • result in inaccurate financial data reporting; and • require significant capital and operating expenditures to investigate and remediate a breach.
Certain elements of the Dodd-Frank Act remain subject to implementing regulations that are yet to be adopted by the applicable regulatory agencies. Compliance with these provisions could require us to review our product and service offerings for potential changes and would likely result in increased compliance costs.
Certain elements of the Dodd-Frank Act remain subject to implementing regulations that are yet to be adopted by the applicable regulatory agencies. Compliance with these provisions could require us to review our product and service 23 Table of Contents offerings for potential changes and would likely result in increased compliance costs.
Section 4975 of the Code prohibits certain transactions involving “plans” (as defined in Section 4975(e)(1)), which include, for example, IRAs and certain Keogh plans and other qualified savings accounts, and service providers, including fiduciaries (as defined in Section 4975(e)(3)), to such plans. Section 4975 also imposes excise taxes for violations of these prohibitions.
Section 4975 of the Code prohibits certain transactions involving “plans” (as defined in Section 24 Table of Contents 4975(e)(1)), which include, for example, IRAs and certain Keogh plans and other qualified savings accounts, and service providers, including fiduciaries (as defined in Section 4975(e)(3)), to such plans. Section 4975 also imposes excise taxes for violations of these prohibitions.
The outcomes of any such legal or regulatory proceedings, including litigations, arbitrations, inquiries, investigations and enforcement proceedings by the SEC, FINRA, DOL and state securities regulators, are difficult to predict.
The outcomes of any such legal or regulatory proceedings, including litigations, arbitrations, inquiries, investigations and enforcement proceedings by the SEC, FINRA, DOL and state securities regulators or attorneys general, are difficult to predict.
Even in a rising interest rate environment, if balances or yields in our client cash programs decrease, future revenue from our client cash programs may be lower than expected. 15 Table of Content s Any damage to our reputation could harm our business and lead to a loss of revenue and net income.
Even in a rising interest rate environment, if balances or yields in our client cash programs decrease, future revenue from our client cash programs may be lower than expected. 15 Table of Contents Any damage to our reputation could harm our business and lead to a loss of revenue and net income.
We have made a significant investment in our infrastructure, and our operations are dependent on our ability to protect the continuity of our infrastructure against damage from catastrophe or natural disaster, breach of security, ransomware attack, human error, loss of power, computer and/or telecommunications failure, or other natural or man-made events.
We have made significant investments in our infrastructure, and our operations are dependent on our ability to protect the continuity of our infrastructure against damage from catastrophe or natural disaster, breach of security, ransomware attack, human error, loss of power, computer and/or telecommunications failure, or other natural or man-made events.
In addition, the equity markets in general have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. These broad market and industry factors may materially harm the market price of our common stock irrespective of our operating performance.
In addition, the equity markets in general have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. These broad market and industry factors may materially harm the market price of our common stock irrespective of our operating 29 Table of Contents performance.
It is not always possible to prevent or detect activities giving rise to claims, and the precautions we take may not be effective in all cases. We maintain voluntary and required insurance coverage, including, among others, general liability, property, director and officer, excess Securities Investor Protection Corporation, business interruption, cyber and data breach, errors and omissions and fidelity bond insurance.
It is not always possible to prevent or detect activities giving rise to claims, and the precautions we take may not be effective in all cases. We maintain voluntary and required insurance coverage, including, among others, general liability, property, director and officer, excess Securities Investor Protection Corporation, business interruption, cyber and data breach, error and omission and fidelity bond insurance.
Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software and networks are to some degree vulnerable to unauthorized access, human error, computer viruses, denial-of-service attacks, malicious code, spam attacks, phishing, ransomware or other forms of social engineering and other events that could impact the security, reliability, confidentiality, integrity and availability of our systems.
Although we take protective measures and endeavor to strengthen the security of these systems as circumstances warrant, our computer systems, software and networks are to some degree vulnerable to unauthorized access, human error, computer viruses, denial-of-service attacks, malicious code, spam attacks, phishing, ransomware or other forms of social engineering and other events that could impact the security, reliability, confidentiality, integrity and availability of our systems.
There cannot be any assurance that we will have sufficient resources to adequately update and expand our information technology systems or capabilities, or offer our services on the personal and mobile computing devices that may be preferred by our advisors and/or their clients, nor can there be any assurance that any upgrade or expansion efforts will be sufficiently timely, successful, secure and accepted by our current and prospective advisors or their clients.
There cannot be any assurance that we will have sufficient resources to adequately update and expand our information technology systems or capabilities, or offer our services on the personal and mobile computing devices that may be preferred by our advisors and/or their clients, nor can there be any assurance that any upgrade or expansion efforts will be sufficiently timely, successful, secure and accepted by our current and prospective 28 Table of Contents advisors or their clients.
We may also face liabilities for actual or alleged breaches of legal duties to clients of our advisors or Independent RIAs, including in respect of issues related to the financial products we make available in our curated product platform or the investment advice or securities recommendations our advisors or Independent RIAs provide to their clients.
We may also face liabilities for actual or alleged breaches of legal duties to clients of our advisors or Independent RIAs, including in respect of issues related to the financial products we make available or the investment advice or securities recommendations our advisors or Independent RIAs provide to their clients.
Our Board declared quarterly cash dividends on our outstanding common stock in 2022 and has authorized us to repurchase shares of the Company’s issued and outstanding shares of common stock.
Our Board declared quarterly cash dividends on our outstanding common stock in 2023 and has authorized us to repurchase shares of the Company’s issued and outstanding shares of common stock.
Failure of our systems, which could result from these or other events beyond our control, or an inability or failure to effectively upgrade those systems or implement new technology-driven products or services, could result in financial losses, unanticipated disruptions in our service, liability to our advisors or advisors’ clients, compliance failures, regulatory sanctions and damage to our reputation.
Failure of our systems, which could result from these or other events beyond our control, or an inability or failure to effectively upgrade those systems, implement new technology-driven products or services, or implement adequate disaster recovery capabilities, could result in financial losses, unanticipated disruptions in our service, liability to our advisors or advisors’ clients, compliance failures, regulatory sanctions and damage to our reputation.
In addition, the Dodd-Frank Act enacted wide-ranging changes in the supervision and regulation of the financial industry designed to provide for greater oversight of financial industry participants, reduce risk in banking practices and in securities and derivatives trading, enhance public company corporate governance practices and executive 23 Table of Content s compensation disclosures and provide for greater protections to individual consumers and investors.
In addition, the Dodd-Frank Act enacted wide-ranging changes in the supervision and regulation of the financial industry designed to provide for greater oversight of financial industry participants, reduce risk in banking practices and in securities and derivatives trading, enhance public company corporate governance practices and executive compensation disclosures and provide for greater protections to individual consumers and investors.
We have sponsorship agreements with some manufacturers of fixed and variable annuities, mutual funds and exchange-traded funds that, subject to the survival of certain terms and conditions, may be terminated by the manufacturer upon notice.
We have sponsorship agreements with some manufacturers of fixed and variable annuities, mutual funds and exchange-traded funds that, subject to the survival of certain terms and conditions, may be 21 Table of Contents terminated by the manufacturer upon notice.
We expect that these developments could negatively impact our results, including by increasing our expenditures related to legal, compliance, and information technology and could result in other costs, including greater risks of client lawsuits and enforcement activity by regulators.
These developments could negatively impact our results, including by increasing our expenditures related to legal, compliance, and information technology and could result in other costs, including greater risks of client lawsuits and enforcement activity by regulators.
To the extent third-party service providers are located in foreign jurisdictions, we are exposed to risks inherent in such providers conducting business outside of the United States, including international economic and political conditions, and the additional costs associated with complying with foreign laws and fluctuations in currency values.
To the extent third-party service providers are located in foreign jurisdictions, we are exposed to risks inherent in such providers conducting business outside of the United States, including international economic and political conditions as well as natural disasters, and the additional costs associated with complying with foreign laws and fluctuations in currency values.
Like us, these intermediaries are exposed to risks related to fluctuations and volatility in the financial markets and broader economy, as well as specific operational risks related to their business, such as those related to technology, security and the prevailing regulatory environment. Because we rely on these intermediaries, we share indirect exposure to these risks.
Like us, these intermediaries are exposed to risks related to fluctuations and volatility in the financial markets and broader economy, as well as specific operational risks related to their business, such as those related to technology, 17 Table of Contents security and the prevailing regulatory environment. Because we rely on these intermediaries, we share indirect exposure to these risks.
If these risks were to materialize, or if there was a widespread perception that they could materialize, our business, reputation and results of operations could be adversely affected. 17 Table of Content s Lack of liquidity or access to capital could impair our business and financial condition. Liquidity, or ready access to funds, is essential to our business.
If these risks were to materialize, or if there was a widespread perception that they could materialize, our business, reputation and results of operations could be adversely affected. Lack of liquidity or access to capital could impair our business and financial condition. Liquidity, or ready access to funds, is essential to our business.
Risks Related to Our Regulatory Environment • Any failure to comply with applicable federal or state laws or regulations exposes us to litigation and regulatory actions, which could increase our costs or negatively affect our reputation. • Regulatory developments could adversely affect our business by increasing our costs or making our business less profitable. • We are subject to various regulatory requirements, which, if not complied with, could result in the restriction of the conduct or growth of our business. • Failure to comply with ERISA regulations and certain tax-qualified plan laws and regulations could result in penalties against us. 13 Table of Content s Risks Related to Our Technology • We rely on technology in our business, and technology and execution failures could subject us to losses, litigation and regulatory actions. • Our information technology systems may be vulnerable to security risks. • A cyber-attack or other security breach of our technology systems or those of our advisors or third-party vendors could subject us to significant liability and harm our reputation. • Failure to comply with the complex privacy and data protection laws and regulations to which we are subject could result in adverse action from regulators. • Failure to maintain technological capabilities, flaws in existing technology, difficulties in upgrading our technology platform or the introduction of a competitive platform could have a material adverse effect on our business. • Inadequacy or disruption of our business continuity and disaster recovery plans and procedures in the event of a catastrophe could adversely affect our business.
Risks Related to Our Regulatory Environment • Any failure to comply with applicable federal or state laws or regulations, or self-regulatory organization rules, exposes us to litigation and regulatory actions, which could increase our costs or negatively affect our reputation. • Regulatory developments could adversely affect our business by increasing our costs or making our business less profitable. • We are subject to various regulatory requirements, which, if not complied with, could result in the restriction of the conduct or growth of our business. • Failure to comply with ERISA regulations and certain tax-qualified plan laws and regulations could result in penalties against us. 13 Table of Contents Risks Related to Our Technology • We rely on technology in our business, and technology and execution failures could subject us to losses, litigation and regulatory actions. • Our information technology systems may be vulnerable to security risks. • A cyber-attack or other security breach of our technology systems or those of our advisors or third-party vendors could negatively impact our normal operations and, as a result, subject us to significant liability and harm our reputation. • Failure to comply with the complex privacy and data protection laws and regulations to which we are subject could result in adverse action from regulators and adversely affect our business, reputation, results of operations and financial condition. • Failure to maintain technological capabilities, flaws in existing technology, difficulties in upgrading our technology platform or the introduction of a competitive platform could have a material adverse effect on our business. • Inadequacy or disruption of our business continuity and disaster recovery plans and procedures in the event of a catastrophe could adversely affect our business.
As a result of these regulations, our future efforts to sell shares or raise additional capital may be delayed or prohibited. In addition, the SEC, FINRA, CFTC, OCC and NFA have extensive rules and regulations with respect to capital requirements.
As a result of these regulations, our future efforts to sell shares, raise additional capital or participate in acquisition activity may be delayed, prohibited or limited. In addition, the SEC, FINRA, CFTC, OCC and NFA have extensive rules and regulations with respect to capital requirements.
Future data security incidents involving individual and regulatory notifications could lead to litigation involving other financial institutions, class actions, regulatory investigations or other harm. Data security incidents within the financial services industry are increasing, and threat actors continue to find novel ways to attack security environments.
Future data security incidents involving individual and regulatory notifications could lead to litigation involving other financial institutions, class actions, regulatory investigations or other harm. 27 Table of Contents Data security incidents within the financial services industry are increasing, and threat actors continue to find novel ways to attack security environments.
For example, certain of our competitors only provide clearing services and consequently would not have any supervision or oversight liability relating to actions of their financial advisors.
For example, certain of our competitors only provide clearing services and consequently would not have any supervision or oversight 14 Table of Contents liability relating to actions of their financial advisors.
We believe that competition within our industry will intensify as a 14 Table of Content s result of consolidation and acquisition activity and because new competitors face few barriers to entry, which could adversely affect our ability to recruit new advisors and retain existing advisors.
We believe that competition within our industry will intensify as a result of consolidation and acquisition activity and because new competitors face few barriers to entry, which could adversely affect our ability to recruit new advisors and retain existing advisors.
If we fail to attract new advisors or to retain and motivate our current advisors, replace our advisors who retire, or assist our retiring advisors with transitioning their practices to existing advisors, or if advisor migration away from wirehouses to independent channels slows, our business may suffer.
If we fail to attract new advisors or to retain and motivate our current advisors, replace our advisors who retire, or assist our retiring advisors with transitioning their practices to other advisors on our platform, or if advisor migration away from wirehouses to independent channels slows, our business may suffer.
Non-compliance with or breaches of these provisions may expose an ERISA fiduciary or other service provider to liability under ERISA, which may include monetary and criminal 24 Table of Content s penalties as well as equitable remedies for the affected plan.
Non-compliance with or breaches of these provisions may expose an ERISA fiduciary or other service provider to liability under ERISA, which may include monetary and criminal penalties as well as equitable remedies for the affected plan.
Upon the occurrence of certain transactions constituting a change of control, all indebtedness under our Credit Agreement may be accelerated and become due and payable and noteholders will have the right to require us to repurchase the Notes at a purchase price equal to 101% of the principal amount of the Notes plus accrued and unpaid interest, if any, to but not including the purchase date.
Upon the occurrence of certain transactions constituting a change of control, all indebtedness under our Credit Agreement may be accelerated and become due and payable and, under certain of the Indentures, noteholders will have the right to require us to repurchase our senior unsecured notes (the “Notes”) issued under such Indentures at a purchase price equal to 101% of the principal amount of such Notes plus accrued and unpaid interest, if any, to but not including the purchase date.
Provisions of our Credit Agreement and the Indentures could discourage an acquisition of us by a third-party. Certain provisions of our Credit Agreement and the Indentures could make it more difficult or more expensive for a third-party to acquire us, and any of our future debt agreements may contain similar provisions.
Certain provisions of our Credit Agreement and the Indentures could make it more difficult or more expensive for a third-party to acquire us, and any of our future debt agreements may contain similar provisions.
For instance, an acquisition could have a negative effect on our financial and strategic position and reputation, or the acquired business could fail to further our strategic or financial goals. We can provide no assurances that advisors who join LPL Financial through acquisitions or investments in advisor practices will remain at LPL Financial.
These transactions are accompanied by risks. For instance, an acquisition could have a negative effect on our financial and strategic position and reputation, or the acquired business could fail to further our strategic or financial goals. We can provide no assurances that advisors who join LPL Financial through acquisitions or investments in advisor practices will remain at LPL Financial.
We depend on highly specialized and, in many cases, proprietary technology to support our business functions, including among others: • securities trading and custody; • portfolio management; 27 Table of Content s • performance reporting; • customer service; • accounting and internal financial processes and controls; and • regulatory compliance and reporting.
We depend on highly specialized and, in many cases, proprietary technology to support our business functions, including among others: • securities trading and custody; • portfolio management; • performance reporting; • customer service; • accounting and internal financial processes and controls; and • regulatory compliance and reporting.
FINRA Rule 1017 generally provides, among other things, that FINRA approval must be obtained in connection with any transaction resulting in a 25% or more change in our ownership that results in one person or entity directly or indirectly owning or controlling 25% or more of us.
FINRA Rule 1017 generally provides, among other things, that FINRA approval must be obtained in connection with any transaction resulting in a 25% or more change in the ownership of a FINRA member that results in one person or entity directly or indirectly owning or controlling 25% or more of such member.
These incidents could involve operational disruptions, notification costs, ransom payments and reputational harm, investigations, litigation and fines with regulators as well as litigation, financial disputes and reputational harm with current and potential advisors and advisors’ clients.
These incidents could involve operational disruptions, notification costs, ransom payments and reputational harm, investigations, litigation and fines with regulators, and increases in insurance premiums as well as litigation, financial disputes and reputational harm with current and potential advisors and advisors’ clients.
Our continued success will depend, in part, upon our ability to: • continue to invest significant resources on our technology systems in order to meet industry and regulatory standards, consumer preferences and the efforts of threat actors to penetrate our systems; • successfully maintain and upgrade the capabilities of our systems; • address the needs of our advisors and their clients by using technology to provide products and services that satisfy their demands while ensuring the security of the data involving those products and services; • use technology effectively and securely to support our regulatory compliance and reporting functions; • comply with the changing landscape of laws and regulations that govern protection of personally identifiable information; and • retain skilled information technology employees.
Our continued success will depend, in part, upon our ability to continue to invest significant resources on our technology systems in order to: • successfully maintain and upgrade the capabilities and resiliency of our systems; • address the needs of our advisors and their clients by using technology to provide products and services that satisfy their demands while ensuring the security of the data involving those products and services; • use technology effectively and securely to support our regulatory compliance and reporting functions; • comply with the changing landscape of laws and regulations that govern protection of personally identifiable information; and • retain skilled information technology employees.
For more information about the potential limits of our insurance coverage, including our self-insurance coverage, please see “ Our insurance coverage may be inadequate or expensive ” above. Regulatory developments could adversely affect our business by increasing our costs or making our business less profitable.
For more information about the potential limits of our insurance coverage, including our self-insurance coverage, see “ Our insurance coverage may be expensive and we may exceed our limits of insurance coverage ” above. Regulatory developments could adversely affect our business by increasing our costs or making our business less profitable.
As a registered broker-dealer, LPL Financial is subject to Rule 15c3-1 (“Net Capital Rule”) under the Exchange Act, and related requirements of SROs. The CFTC and NFA also impose net capital requirements. The Net Capital Rule specifies minimum capital requirements that are intended to ensure the general soundness and liquidity of broker-dealers.
Our registered broker-dealer subsidiaries, including LPL Financial, are subject to Rule 15c3-1 (“Net Capital Rule”) under the Exchange Act, and related requirements of SROs. The CFTC and NFA also impose net capital requirements. The Net Capital Rule specifies minimum capital requirements that are intended to ensure the general soundness and liquidity of broker-dealers.
Assessing the probability of a loss occurring and the timing and amount of any loss related to a regulatory matter or a legal proceeding is inherently difficult and requires complex judgments, which may include the procedural status of the matter and any recent developments; prior experience and the experience of others in similar matters; the size and nature of potential exposures; available defenses; the progress of fact discovery; the opinions of counsel and experts; potential opportunities for settlement and the status of any settlement discussions; as well as the potential for insurance coverage and indemnification, if available.
Further to the difficulties noted above regarding assessing the probability of a loss occurring and the timing and amount of any loss related to a regulatory matter or a legal proceeding, such assessment requires complex judgments, which may include the procedural status of the matter and any recent developments; prior experience and the experience of others in similar matters; the size and nature of potential exposures; available defenses; the progress of fact discovery; the opinions of counsel and experts; potential opportunities for settlement and the status of any settlement discussions; as well as the potential for insurance coverage and indemnification, if available.
Restrictions under our Credit Agreement and the Indentures governing our Notes may prevent us from taking actions that we believe would be in the best interest of our business.
Restrictions under our Credit Agreement may prevent us from taking actions that we believe would be in the best interest of our business.
If any such disruption or failure, real or perceived, occurs, we or our advisors may be exposed to unexpected liability, advisors or their clients may withdraw assets, our reputation may be tarnished and there could be a material adverse effect on our business.
If any such disruption or failure occurs, or is perceived to have occurred, we or our advisors may be exposed to unexpected liability, advisors or their clients may withdraw assets, our reputation may be harmed and there could be a material adverse effect on our business.
A potential acquirer may not have sufficient financial resources to purchase our outstanding indebtedness in connection with a change of control. 20 Table of Content s Our insurance coverage may be inadequate or expensive. We are subject to claims in the ordinary course of business. These claims may involve substantial amounts of money and involve significant defense costs.
A potential acquirer may not have sufficient financial resources to purchase our outstanding indebtedness in connection with a change of control. Our insurance coverage may be expensive and we may exceed our limits of insurance coverage. We are subject to claims in the ordinary course of business. These claims may involve substantial amounts of money and involve significant defense costs.
We also cannot assure that misconduct or errors by our employees, advisors or Independent RIAs will not lead to a material adverse effect on our business, or that our errors and omissions insurance will be sufficient to cover such misconduct or errors.
We also cannot assure that misconduct or errors by our employees, advisors or Independent RIAs will not lead to a material adverse effect on our business, or that our insurance will be available or sufficient to cover the cost to our business of such misconduct or errors.
Regulators have in the past raised, and may in the future raise, concerns with respect to the 22 Table of Content s quality, consistency or oversight of our compliance systems and programs and our past or future compliance with applicable laws, rules and regulations.
Regulators have in the past raised, and may in the future raise, concerns with respect to the quality, consistency or oversight of certain aspects of our compliance systems and programs and our past or future compliance with applicable laws, rules and regulations.
Our broker-dealer subsidiary is subject to requirements of the SEC, FINRA, CFTC, NFA and other regulators relating to liquidity, capital standards and the use of client funds and securities, which may limit funds available for the payment of dividends to us.
Our broker-dealer subsidiaries, including LPL Financial, are subject to requirements of the SEC, FINRA, CFTC, NFA and other regulators relating to liquidity, capital standards and the use of client funds and securities, which may limit funds available for the payment of dividends to us.
We continue to monitor regulations related to data privacy and protection on both a domestic and international level to assess requirements and impacts on our business operations. Further developments could negatively impact our business and operations.
We continue to monitor regulations related to data privacy and protection on both a domestic and international level to assess requirements and impacts on our business operations.
However, the ability of our holding companies to withdraw capital from our broker-dealer subsidiary could be restricted in the event of a net capital shortfall at LPL Financial, which in turn could limit our ability to repay debt, redeem or purchase shares of our outstanding stock or pay dividends.
However, the ability of our holding companies to withdraw capital from our broker-dealer subsidiaries, including LPL Financial, could be restricted in the event they experience a net capital shortfall, which in turn could limit our ability to repay debt, redeem or repurchase shares of our outstanding stock or pay dividends.
For example, in October 2022, we 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 we have not approved. We intend to cooperate fully with the SEC’s inquiry.
For example, in October 2022, we received a request for information from the SEC in connection with an investigation of the 22 Table of Contents Company’s compliance with records preservation requirements for business-related electronic communications stored on personal devices or messaging platforms that we have not approved.
In particular, advisors work in a wide variety of environments, and although we require minimum security by policy, we cannot ensure the consistent compliance with these policies across all of our advisors, or that our policy will be adequate to address the evolving threat environment.
In particular, advisors work in a wide variety of environments, and although we require our advisors to maintain certain 25 Table of Contents minimum security levels and adopt certain security procedures by policy, we cannot ensure the universal or consistent compliance with these policies across all of our advisors, or that our policy will be adequate to address the evolving threat environment.
ERISA imposes certain duties on persons who are “fiduciaries” (as defined in Section 3(21) of ERISA and the DOL’s Five-Part Test and PTE 2020-02 rules or interpretations) and prohibits certain transactions involving plans subject to ERISA and fiduciaries or other service providers to such plans.
ERISA imposes certain duties on persons who are “fiduciaries” (as defined in Section 3(21) of ERISA and the related rules or interpretations) and prohibits certain transactions involving plans subject to ERISA and fiduciaries or other service providers to such plans.
If any person, including any of our employees or advisors, negligently disregards or intentionally breaches our established controls with respect to client data, or otherwise mismanages or misappropriates that data, we could also be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions. 25 Table of Content s Our information technology systems may be vulnerable to security risks.
If any person, including any of our employees or advisors, negligently disregards or intentionally breaches our established controls with respect to confidential client data, or otherwise mismanages or misappropriates that data, we could also be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.
At December 31, 2022, we had total indebtedness of $2.7 billion, of which $1.0 billion is subject to floating interest rates. Our level of indebtedness could increase our vulnerability to general adverse economic and industry conditions.
At December 31, 2023, we had total indebtedness of $3.7 billion , of which $1.3 billion i s subject to floating interest rates. Our level of indebtedness could increase our vulnerability to general adverse economic and industry conditions.
Under our Credit Agreement we have the right to request additional commitments for new term loans, new revolving credit commitments and increases to then-existing term loans and revolving credit commitments subject to certain limitations.
Our Credit Agreement and the Indentures governing our Notes permit us to incur additional indebtedness. Under our Credit Agreement we have the right to request additional commitments for new term loans, new revolving credit commitments and increases to then-existing term loans and revolving credit commitments subject to certain limitations.
Furthermore, if an event of default were to occur with respect to our Credit Agreement, our Broker-Dealer Revolving Credit Facility or other future indebtedness, we could lose access to these sources of liquidity and our creditors could, among other things, accelerate the maturity of our indebtedness. 19 Table of Content s Our Credit Agreement and the Indentures governing our Notes permit us to incur additional indebtedness.
Furthermore, if an event of default were to occur with respect to our Credit Agreement, our Broker-Dealer Revolving Credit Facility or other future indebtedness, we could lose access to these sources of liquidity and our creditors could, among other things, accelerate the maturity of our indebtedness.
Clients of our advisors have control over their assets that are served under our platforms. Poor service or performance of the financial products that we offer, the emergence of new financial products or services from others, harm to our reputation or competitive pressures on pricing of such services or products may result in the loss of clients.
Poor service or performance of the financial products that we offer, the emergence of new financial products or services from others, harm to our reputation or competitive pressures on pricing of such services or products may result in the loss of clients.
As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital, or bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility. Our business could be materially adversely affected as a result of the risks associated with acquisitions and investments.
As such, we may be forced to delay raising capital, issue different types of capital than we would otherwise, less effectively deploy such capital, or bear an unattractive cost of capital, which could decrease our profitability and significantly reduce our financial flexibility.
Failure to properly perform operational tasks or errors in the design or function of these tools, could subject us to regulatory sanctions, penalties or litigation and result in reputational damage, and liability to clients.
Failure to properly perform operational tasks or errors in the design or function of these tools, could subject us to regulatory sanctions, penalties or litigation and result in reputational damage, and liability to clients. We are subject to various standards of care, including in some cases fiduciary obligations.
Compliance with this regulation may impede our ability to receive dividends from our broker-dealer subsidiary. Our future ability to pay regular dividends to holders of our common stock or repurchase shares are subject to the discretion of our Board and will be limited by our ability to generate sufficient earnings and cash flows.
Our future ability to pay regular dividends to holders of our common stock or repurchase shares are subject to the discretion of our Board and will be limited by our ability to generate sufficient earnings and cash flows.
In addition, complying with these covenants may also cause us to take actions that are not favorable to holders of our common stock and may make it more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such restrictions.
In addition, complying with these covenants may also cause us to take actions that are not favorable to holders of our common stock and may make it more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such restrictions. 20 Table of Contents Provisions of our Credit Agreement and certain of the Indentures could discourage an acquisition of us by a third-party.
We are subject to various standards of care, including in some cases fiduciary obligations. In addition, the administration of client accounts involves functions such as recordkeeping and accounting, security pricing, corporate actions, and account reconciliations that are complex and rely on tools and resources to support these operational processes.
In addition, the administration of client accounts involves operational processes such as recordkeeping and accounting, security pricing, corporate actions, and account reconciliations that are complex and rely on various tools and resources.
Risks Related to Our Regulatory Environment Any failure to comply with applicable federal or state laws or regulations exposes us to litigation and regulatory actions, which could increase our costs or negatively affect our reputation . Our business, including securities and investment advisory services, is subject to extensive regulation under both federal and state laws, rules and regulations.
Risks Related to Our Regulatory Environment Any failure to comply with applicable federal or state laws or regulations, or SRO rules, exposes us to litigation and regulatory actions, which could increase our costs or negatively affect our reputation .

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties A summary of our significant locations at December 31, 2022 is shown in the following table: Location Approximate Square Footage Lease Expiration Fort Mill, South Carolina 452,000 2036 San Diego, California 420,000 2029 Boston, Massachusetts 69,000 2023 Austin, Texas 57,000 2029 Overland Park, Kansas 30,000 2023 We also lease smaller administrative and operational offices in various locations throughout the United States.
Biggest changeItem 2. Properties A summary of our significant locations at December 31, 2023 is shown in the following table: Location Approximate Square Footage Lease Expiration Fort Mill, South Carolina 461,000 2036 San Diego, California 420,000 2029 Austin, Texas 57,000 2029 We also lease smaller administrative and operational offices in various locations throughout the United States.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, we have been subjected to and are currently subject to legal and regulatory proceedings arising out of our business operations, including lawsuits, arbitration claims and inquiries, investigations and enforcement proceedings initiated by the SEC, FINRA and state securities regulators, as well as other actions and claims.
Biggest changeLegal Proceedings From time to time, we have been subjected to and are currently subject to legal and regulatory proceedings arising out of our business operations, including lawsuits, arbitration claims and inquiries, investigations and enforcement proceedings initiated by the SEC, FINRA and state securities regulators, as well as other actions and claims. 31 Table of Contents For a discussion of legal proceedings, see Note 14 - Commitments and Contingencies within the notes to the consolidated financial statements and Part I, “Item 1A.
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For a discussion of legal proceedings, see Note 14 - Commitments and Contingencies within the notes to the consolidated financial statements and Part I, “Item 1A. Risk Factors” in this Annual Report on Form 10-K.
Added
Risk Factors” in this Annual Report on Form 10-K.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAudette 48 Chief Financial Officer and Head of Business Operations Matthew Enyedi 49 Managing Director, Client Success Greg Gates 45 Managing Director, Chief Technology & Information Officer Aneri Jambusaria 39 Managing Director, LPL Services Group Sallie R.
Biggest changeAudette 49 Chief Financial Officer and Head of Business Operations Althea Brown 47 Managing Director, Chief Legal Officer Sara Dadyar 50 Managing Director, Chief Human Capital Officer Matthew Enyedi 50 Managing Director, Client Success Greg Gates 46 Managing Director, Chief Technology & Information Officer Aneri Jambusaria 40 Managing Director, LPL Services Group Kabir Sethi 53 Managing Director, Chief Product Officer Richard Steinmeier 50 Managing Director, Divisional President, Business Development Executive Officers Dan H.
The client success organization is a client-centered, cross-functional team responsible for fueling the sustained success and satisfaction of the Company’s advisors and enterprises. Under this organization, the relationship management, marketing and 31 Table of Content s communications, service and supervision teams focus on providing an integrated and consistent experience across clients’ primary touchpoints with LPL. Mr.
The client success organization is a client-centered, cross-functional team responsible for fueling the sustained success and satisfaction of the Company’s advisors and enterprises. Under this organization, the relationship management, marketing and communications, service and supervision teams focus on providing an integrated and consistent experience across clients’ primary touchpoints with LPL. Mr.
Steinmeier earned a B.S. in economics from the Wharton School at the University of Pennsylvania and an M.B.A. from Stanford University. 33 Table of Content s PART II
Steinmeier earned a B.S. in economics from the Wharton School at the University of Pennsylvania and an M.B.A. from Stanford University. PART II
The following table provides certain information about each of the Company’s executive officers as of the date this Annual Report on Form 10-K has been filed with the SEC: Name Age Position Dan H. Arnold 58 President and Chief Executive Officer Matthew J.
Item 4. Mine Safety Disclosures Not applicable. 32 Table of Contents Information about our Executive Officers The following table provides certain information about each of the Company’s executive officers as of the date this Annual Report on Form 10-K has been filed with the SEC: Name Age Position Dan H. Arnold 59 President and Chief Executive Officer Matthew J.
Mr. Audette began his career in the financial services practice at KPMG. Mr. Audette earned a B.S. in accounting from Virginia Polytechnic Institute and State University, popularly known as Virginia Tech. Matthew Enyedi — Managing Director, Client Success Mr. Enyedi has served as managing director, client success since February 2023.
Mr. Audette began his career in the financial services practice at KPMG. Mr. Audette earned a B.S. in accounting from Virginia Polytechnic Institute and State University, popularly known as Virginia Tech. Althea Brown — Managing Director, Chief Legal Officer Ms. Brown has served as managing director, chief legal officer since September 2023.
(2) Mr. Semerjian will be departing the Company in March 2023. Executive Officers Dan H. Arnold — President and Chief Executive Officer Mr. Arnold has served as our chief executive officer since January 2017. He has served as our president since March 2015 with responsibility for our primary client-facing functions and long-term strategy for growth. Mr.
Arnold — President and Chief Executive Officer Mr. Arnold has served as our chief executive officer since January 2017. He has served as our president since March 2015 with responsibility for our primary client-facing functions and long-term strategy for growth. Mr.
She is responsible for company-wide legal, regulatory and government relations matters and has a leading role in LPL Financial’s ongoing focus on enhancing the corporate risk profile. Ms. Oroschakoff has more than 20 years of financial services industry experience in legal, compliance and risk management, including leading the Company’s compliance and risk management functions from 2013 to February 2023.
She is responsible for company-wide legal, regulatory and government relations matters and has a leading role in LPL Financial’s ongoing focus on enhancing the corporate risk profile. Ms. Brown has more than 25 years of experience in the financial services, technology and retail industries, leading high-performing legal teams for large corporations.
Jambusaria earned her B.S. in economics from the Wharton School at the University of Pennsylvania and her M.B.A. from Northwestern University’s Kellogg School of Management. Sallie R. Larsen — Managing Director, Chief Human Capital Officer Ms. Larsen is managing director, chief human capital officer of LPL Financial.
Jambusaria earned her B.S. in economics from the Wharton School at the University of Pennsylvania and her M.B.A. from Northwestern University’s Kellogg School of Management. 34 Table of Contents Kabir Sethi — Managing Director, Chief Product Officer Mr. Sethi has served as managing director, chief product officer of LPL Financial since May 2022.
She is responsible for overseeing human resources, executive communication, talent development, corporate real estate, total rewards and talent acquisition, advisor and employee learning and development, and diversity, equity and inclusion. Ms.
She is responsible for overseeing human resources, talent development, corporate real estate, total rewards and talent acquisition, advisor and employee learning and development, culture and engagement, and diversity, equity, inclusion and belonging. Ms. Dadyar joined LPL Financial in January 2024 from Proterra Inc., where she served as the chief people officer from October 2022 to December 2023.
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Item 4. Mine Safety Disclosures Not applicable. 30 Table of Content s Information about our Executive Officers On February 16, 2023, the Company announced an organizational realignment of certain business functions in support of its client experience.
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She joined LPL Financial from Google, where she spent 11 years, serving most recently as Legal Director, overseeing a large team of product and commercial lawyers advising subsidiary Fitbit and Google’s Devices and Services’ marketing, e-commerce, retail, customer support, and vendor management teams. Earlier in her career, Ms.
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Larsen (1) 69 Managing Director, Chief Human Capital Officer Michelle Oroschakoff (1) 61 Managing Director, Chief Legal Officer Dayton Semerjian (2) 58 Managing Director, Chief Customer Care Officer Kabir Sethi 52 Managing Director, Chief Product Officer Richard Steinmeier 49 Managing Director, Divisional President, Business Development ____________________ (1) Ms. Larsen and Ms. Oroschakoff will be retiring from the Company in 2023.
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Brown served as supervising attorney for Morgan Stanley Smith Barney, and spent 10 years in a variety of roles at J.P. Morgan 33 Table of Contents Chase in their Investment Management and Investment Banking divisions. Ms. Brown received a B.A. in economics and French from New York University and a J.D. from Fordham University School of Law.
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Larsen joined LPL Financial in May 2012 from the Federal Home Loan Bank/Office of Finance, where she served as the chief human resources officer from November 2009 to April 2012. In earlier roles, Ms.
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She holds a Six Sigma Black Belt and is a Fellow with the Leadership Council on Legal Diversity. Sara Dadyar — Managing Director, Chief Human Capital Officer Ms. Dadyar has served as managing director, chief human capital officer of LPL Financial since January 2024.
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Larsen was a managing vice president of human resources for Capital One Financial Corporation, senior vice president of human resources for Marriott International and vice president of human resources and communications for TRW Inc. Ms.
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Prior to Proterra, Ms. Dadyar worked at GE for over 24 years, including as the executive Human Resources leader for GE Gas Power and GE Capital Americas, global executive director of Human Resources for GE Working Capital Solutions, and senior Human Resources director of GE Media, Communications and Entertainment. Ms.
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Larsen earned a M.A. in communications from Purdue University, a B.A. in sociology from California Lutheran University and a certificate in executive leadership coaching from Georgetown University. Michelle Oroschakoff — Managing Director, Chief Legal Officer Ms. Oroschakoff is managing director, chief legal officer of LPL Financial.
Added
Dadyar earned a B.A. in art history from the University of Connecticut and completed M.S. coursework in human resources management from Manhattanville College. Matthew Enyedi — Managing Director, Client Success Mr. Enyedi has served as managing director, client success since February 2023.
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She joined LPL Financial as managing director, chief risk officer in September 2013 from Morgan Stanley, and was promoted to chief legal and risk officer in June 2017. She became chief legal officer in June 2018.
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At Morgan Stanley, she most recently served as managing director and 32 Table of Content s global chief risk officer of the firm’s Global Wealth Management Group from 2011 to 2013. Previously, while with Morgan Stanley, she served as chief administrative officer from 2010 to 2011, as well as chief compliance officer from 2006 to 2010.
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Earlier in her career, Ms. Oroschakoff spent 11 years in a variety of legal and compliance roles at Morgan Stanley, including associate general counsel and head of the firm’s San Francisco litigation department. She also served as the general counsel for a large and successful RIA firm where she became familiar with the independent model.
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She is the President of the SIFMA Compliance and Legal Executive Committee. Ms. Oroschakoff earned a B.A. in English literature from the University of Oregon and a J.D., with honors, from the University of Michigan. Dayton Semerjian — Managing Director, Chief Customer Care Officer Mr.
Removed
Semerjian has served as managing director, chief customer care officer of LPL Financial since February 2019. He has been responsible for LPL Financial’s customer satisfaction and client-centric efforts and led Service, Trading and Operations, LPL Financial’s largest business unit. As a result of the organizational realignment announced in February 2023, Mr. Semerjian will depart the Company effective March 31, 2023.
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Before joining LPL Financial, Mr. Semerjian was general manager and senior vice president for Global Customer Success at CA Technologies Inc., which he joined in 2005 when the firm acquired Concord Communication Inc. At Concord, he was executive vice president of marketing and strategic alliances. Mr.
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Semerjian also gained experience leading firms in adopting new service models that focus on improving the customer experience at scale through leadership roles at Intel Corp., Nation Street Inc. and Corente Inc., which was acquired by Oracle. Mr. Semerjian received a B.B.A. in marketing and management from the University of Massachusetts and an M.B.A. from Harvard Business School.
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He was also awarded an advanced certificate of executive management by the MIT Sloan School of Management. Kabir Sethi — Managing Director, Chief Product Officer Mr. Sethi has served as managing director, chief product officer of LPL Financial since May 2022.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+0 added−0 removed2 unchanged
Biggest changePerformance Graph The following graph compares the cumulative total stockholder return (rounded to the nearest whole dollar) of the Company’s common stock, the Standard & Poor’s 500 Financial Sector Index and the Dow Jones U.S. Financial Services Index for the five-year period ended December 31, 2022.
Biggest changeThe number of stockholders of record does not reflect the number of individual or institutional stockholders that beneficially own the Company’s stock because most stock is held in the name of nominees. 35 Table of Contents Performance Graph The following graph compares the cumulative total stockholder return (rounded to the nearest whole dollar) of the Company’s common stock, the Standard & Poor’s 500 Financial Sector Index and the Dow Jones U.S.
The repurchases may be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including transactions with affiliates, with the timing of purchases and the amount of shares purchased generally determined at the discretion of the Company within the constraints of the Credit Agreement, the Indentures, applicable laws and consideration of the Company’s general liquidity needs.
The repurchases may be executed from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including transactions with affiliates, with the timing of purchases and the amount of shares purchased generally determined at the discretion of the Company within the constraints of the Credit Agreement, applicable laws and consideration of the Company’s general liquidity needs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Debt and 34 Table of Content s Related Covenants. ” In addition, FINRA regulations restrict dividends in excess of 10% of a member firm’s excess net capital without FINRA’s prior approval, potentially impeding our ability to receive dividends from LPL Financial.
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Debt and Related Covenants. ” In addition, FINRA regulations restrict dividends in excess of 10% of a member firm’s excess net capital without FINRA’s prior approval, potentially impeding our ability to receive dividends from LPL Financial.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “LPLA.” The closing sale price as of February 15, 2023 was $247.91 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is traded on the Nasdaq Global Select Market under the symbol “LPLA.” The closing sale price as of February 16, 2024 was $257.66 per share.
Our Credit Agreement and the Indentures governing the Notes contain restrictions on our activities, including paying dividends on our capital stock. For an explanation of these restrictions, see “ Item 7.
Our Credit Agreement contains restrictions on our activities, including paying dividends on our capital stock. For an explanation of these restrictions, see “ Item 7.
The graph assumes a $100 investment at the closing price on December 31, 2017 and reinvestment of the dividends on the respective dividend payment dates without commissions. This graph does not forecast future performance of the Company’s stock.
Financial Services Index for the five-year period ended December 31, 2023. The graph assumes a $100 investment at the closing price on December 31, 2018 and reinvestment of the dividends on the respective dividend payment dates without commissions. This graph does not forecast future performance of the Company’s stock.
Securities Authorized for Issuance Under Equity Compensation Plans The table below sets forth information on compensation plans under which our equity securities are authorized for issuance as of December 31, 2022: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 673,764 $ 53.45 13,781,800 Purchases of Equity Securities by the Issuer The table below sets forth information regarding share repurchases, reported on a trade date basis, during the three months ended December 31, 2022: Period Total number of shares purchased Weighted-average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program (millions) (1) October 1, 2022 through October 31, 2022 232,104 $ 241.76 232,104 $ 2,093.9 November 1, 2022 through November 30, 2022 248,811 $ 238.92 248,811 $ 2,034.5 December 1, 2022 through December 31, 2022 155,411 $ 221.70 155,411 $ 2,000.0 Total 636,326 636,326 (1) On September 21, 2022, the Board authorized a $2.1 billion increase to the amount available for repurchases of the Company’s issued and outstanding common shares, with $2.0 billion available for repurchases beginning in 2023.
Securities Authorized for Issuance Under Equity Compensation Plans The table below sets forth information on compensation plans under which our equity securities are authorized for issuance as of December 31, 2023: Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans Equity compensation plans approved by security holders 546,820 $ 54.81 12,796,123 36 Table of Contents Purchases of Equity Securities by the Issuer The table below sets forth information regarding share repurchases, reported on a trade date basis, during the three months ended December 31, 2023: Period Total number of shares purchased Weighted-average price paid per share Total number of shares purchased as part of publicly announced program Approximate dollar value of shares that may yet be purchased under the program (millions) (1) October 1, 2023 through October 31, 2023 50,145 $ 223.28 50,145 $ 1,113.8 November 1, 2023 through November 30, 2023 569,041 $ 223.36 569,041 $ 986.7 December 1, 2023 through December 31, 2023 394,277 $ 219.96 394,277 $ 900.0 Total 1,013,463 1,013,463 (1) On September 21, 2022, the Board authorized a $2.1 billion increase to the amount available for repurchases of the Company’s issued and outstanding common shares, with $2.0 billion available for repurchases beginning in 2023.
As of that date, there were 938 common stockholders of record based on information provided by our transfer agent. The number of stockholders of record does not reflect the number of individual or institutional stockholders that beneficially own the Company’s stock because most stock is held in the name of nominees.
As of that date, there were 871 common stockholders of record based on information provided by our transfer agent.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

8 edited+3 added−1 removed0 unchanged
Biggest changeGross profit: Non-GAAP financial measure defined as total revenue less advisory and commission expense and brokerage, clearing and exchange expense. Indentures: The indentures governing the Company’s senior unsecured notes. Leverage Ratio: A financial metric from our Credit Agreement that is calculated by dividing Credit Agreement net debt, which equals consolidated total debt less Corporate Cash, by Credit Agreement EBITDA.
Biggest changeFINRA: The Financial Industry Regulatory Authority. GAAP: Accounting principles generally accepted in the United States of America. Gross profit: A non-GAAP financial measure defined as total revenue less advisory and commission expense; brokerage, clearing and exchange expense; and market fluctuations on employee deferred compensation. Indentures: The indentures governing the Company’s senior unsecured notes.
Uniform Net Capital Rule: Refers to Rule 15c3-1 under the Securities Exchange Act of 1934, which specifies minimum capital requirements that are intended to ensure the general financial soundness and liquidity of broker-dealers.
Uniform Net Capital Rule: Refers to Rule 15c3-1 under the Exchange Act, which specifies minimum capital requirements that are intended to ensure the general financial soundness and liquidity of broker-dealers.
Credit Agreement EBITDA: A non-GAAP financial measure defined in the Credit Agreement as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments (including unusual or non-recurring charges) and gains, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions.
Credit Agreement EBITDA: A non-GAAP financial measure defined in the Credit Agreement as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions.
Corporate Cash: A component of cash and equivalents that includes the sum of cash and equivalents from the following: (1) cash and equivalents held at LPL Holdings, Inc., (2) cash and equivalents held at regulated subsidiaries as defined by the Company’s Credit Agreement (as defined below), which include LPL Financial LLC and The Private Trust Company, N.A., in excess of the capital requirements of the Company’s Credit Agreement (as defined below), which, in the case of LPL Financial LLC, is net capital in excess of 10% of its aggregate debits, or five times the net capital required in accordance with the Uniform Net Capital Rule (as defined below), and (3) cash and equivalents held at non-regulated subsidiaries. 35 Table of Content s Credit Agreement: The Company’s amended and restated credit agreement.
Corporate Cash: A component of cash and equivalents that includes the sum of cash and equivalents from the following: (1) cash and equivalents held at LPL Holdings, Inc., (2) cash and equivalents held at regulated subsidiaries as defined by the Company’s Credit Agreement, which include LPL Financial LLC and The Private Trust Company, N.A., in excess of the capital requirements of the Company’s Credit Agreement, which, in the case of LPL Financial LLC is net capital in excess of 10% of its aggregate debits, or five times the net capital required in accordance with the Uniform Net Capital Rule, and (3) cash and equivalents held at non-regulated subsidiaries.
Core G&A: A non-GAAP financial measure defined as total expense excluding the following expenses: advisory and commission; depreciation and amortization; interest expense on borrowings; brokerage, clearing and exchange; amortization of other intangibles; loss on extinguishment of debt; promotional (ongoing); acquisition costs; employee share-based compensation; and regulatory charges.
Core G&A: A non-GAAP financial measure defined as total expense excluding the following expenses: advisory and commission; depreciation and amortization; interest expense on borrowings; brokerage, clearing and exchange; amortization of other intangibles; market fluctuations on employee deferred compensation; promotional (ongoing); employee share-based compensation; regulatory charges; and acquisition costs.
Dodd-Frank Act: The Dodd-Frank Wall Street Reform and Consumer Protection Act. DOL: The United States Department of Labor. EBITDA: A non-GAAP financial measure defined as net income plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles.
Dodd-Frank Act: The Dodd-Frank Wall Street Reform and Consumer Protection Act. DOL: The United States Department of Labor. 37 Table of Contents EBITDA: A non-GAAP financial measure defined as net income plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles. ERISA: The Employee Retirement Income Security Act of 1974.
NFA: The National Futures Association. OCC: The Office of the Comptroller of the Currency. RIA: Registered investment advisor. SEC: The U.S. Securities and Exchange Commission. SRO: Self-regulatory organization.
Leverage Ratio: A financial metric from our Credit Agreement that is calculated by dividing Credit Agreement net debt, which equals consolidated total debt less Corporate Cash, by Credit Agreement EBITDA. NFA: The National Futures Association. OCC: The Office of the Comptroller of the Currency. RIA: Registered investment advisor. SEC: The U.S. Securities and Exchange Commission. SRO: Self-regulatory organization.
EPS prior to amortization of intangible assets and acquisition costs: A non-GAAP financial measure defined as Adjusted Net Income divided by the weighted average number of diluted shares outstanding for the applicable period. ERISA: The Employee Retirement Income Security Act of 1974. FINRA: The Financial Industry Regulatory Authority. GAAP: Accounting principles generally accepted in the United States of America.
Item 6. Reserved GLOSSARY OF TERMS Adjusted EPS: A non-GAAP financial measure defined as Adjusted Net Income divided by the weighted average number of diluted shares outstanding for the applicable period.
Removed
Item 6. Reserved GLOSSARY OF TERMS Adjusted Net Income: A non-GAAP financial measure defined as net income plus the after-tax impact of amortization of other intangibles and acquisition costs. Basis Point: One basis point equals 1/100th of 1%. CFTC: The Commodity Futures Trading Commission.
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Adjusted Net Income: A non-GAAP financial measure defined as net income plus the after-tax impact of amortization of other intangibles, acquisition costs and a regulatory charge related to 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.
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Basis Point: One basis point equals 1/100th of 1%. CFTC: The Commodity Futures Trading Commission.
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Credit Agreement: The Company’s amended and restated credit agreement.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+38 added−29 removed65 unchanged
Biggest changeOur key operating, business and financial metrics are as follows: As of and for the Years Ended December 31, Operating Metrics (dollars in billions) (1) 2022 2021 Advisory and Brokerage Assets (2) Advisory assets $ 583.1 $ 643.2 Brokerage assets 527.7 563.2 Total Advisory and Brokerage Assets $ 1,110.8 $ 1,206.4 Advisory as a % of total Advisory and Brokerage Assets 52.5 % 53.3 % Net New Assets (3) Net new advisory assets $ 52.4 $ 123.5 Net new brokerage assets 43.5 66.6 Total Net New Assets $ 95.9 $ 190.0 Organic Net New Assets Organic net new advisory assets $ 52.4 $ 89.4 Organic net new brokerage assets 43.5 29.4 Total Organic Net New Assets $ 95.9 $ 118.8 Organic advisory net new assets annualized growth (4) 8.1 % 19.4 % Total organic net new assets annualized growth (4) 7.9 % 13.2 % 38 Table of Content s As of and for the Years Ended December 31, 2022 2021 Client Cash Balances (5) Insured cash account sweep $ 46.8 $ 30.0 Deposit cash account sweep 11.5 9.3 Total Bank Sweep 58.4 39.3 Money market sweep 3.0 16.1 Total Client Cash Sweep Held by Third Parties 61.4 55.4 Client cash account 2.7 1.7 Total Client Cash Balances $ 64.1 $ 57.1 Client Cash Balances as a % of Total Assets 5.8% 4.7% Net buy (sell) activity (6) $ 61.6 $ 69.1 Business and Financial Metrics (dollars in millions) Advisors 21,275 19,876 Average total assets per advisor (7) $ 52.2 $ 60.7 Share repurchases $ 325.0 $ 90.0 Dividends $ 79.8 $ 80.1 Leverage ratio (8) 1.39 2.26 Years Ended December 31, Financial Metrics (dollars in millions, except per share data) 2022 2021 Total revenue $ 8,600.8 $ 7,720.8 Net income $ 845.7 $ 459.9 Earnings per share (“EPS”), diluted $ 10.40 $ 5.63 Non-GAAP Financial Metrics (dollars in millions, except per share data) EPS prior to amortization of intangible assets and acquisition costs (9) $ 11.52 $ 7.02 Gross profit (10) $ 3,189.9 $ 2,454.7 EBITDA (11) $ 1,525.3 $ 936.4 Core G&A (12) $ 1,191.9 $ 1,058.2 ____________________ (1) Totals may not foot due to rounding.
Biggest changeOur key operating, business and financial metrics are as follows: As of and for the Years Ended December 31, Operating Metrics (dollars in billions) (1) 2023 2022 Advisory and Brokerage Assets (2) Advisory assets $ 735.8 $ 583.1 Brokerage assets 618.2 527.7 Total Advisory and Brokerage Assets $ 1,354.1 $ 1,110.8 Advisory as a % of total Advisory and Brokerage Assets 54.3 % 52.5 % Net New Assets (3) Net new advisory assets $ 76.0 $ 52.4 Net new brokerage assets 28.1 43.5 Total Net New Assets $ 104.1 $ 95.9 Organic Net New Assets Organic net new advisory assets $ 75.0 $ 52.4 Organic net new brokerage assets 25.4 43.5 Total Organic Net New Assets $ 100.4 $ 95.9 Organic advisory net new assets annualized growth (4) 12.9 % 8.1 % Total organic net new assets annualized growth (4) 9.0 % 7.9 % Client Cash Balances Insured cash account sweep $ 34.5 $ 46.8 Deposit cash account sweep 9.3 11.5 Total Bank Sweep 43.8 58.4 Money market sweep 2.4 3.0 Total Client Cash Sweep Held by Third Parties 46.2 61.4 Client cash account 2.3 2.7 Total Client Cash Balances $ 48.5 $ 64.1 Client Cash Balances as a % of Total Assets 3.6% 5.8% 40 Table of Contents As of and for the Years Ended December 31, 2023 2022 Net buy (sell) activity (5) $ 137.6 $ 61.6 Business and Financial Metrics (dollars in millions) Advisors 22,660 21,275 Average total assets per advisor (6) $ 59.8 $ 52.2 Share repurchases $ 1,100.1 $ 325.0 Dividends $ 92.2 $ 79.8 Leverage ratio (7) 1.63 1.39 Years Ended December 31, Financial Metrics (dollars in millions, except per share data) 2023 2022 Total revenue $ 10,052.8 $ 8,600.8 Net income $ 1,066.3 $ 845.7 Earnings per share (“EPS”), diluted $ 13.69 $ 10.40 Non-GAAP Financial Metrics (dollars in millions, except per share data) Adjusted EPS (8) $ 15.72 $ 11.52 Gross profit (9) $ 4,027.0 $ 3,189.9 EBITDA (10) $ 1,985.8 $ 1,525.3 Core G&A (11) $ 1,369.4 $ 1,191.9 ____________________ (1) Totals may not foot due to rounding.
Accordingly, its trading activities are subject to the NFA financial requirements and it is required to maintain net capital that is in excess of or equal to the greatest of NFA’s minimum financial requirements. The NFA was designated by the Commodity Futures Trading Commission as LPL Financial’s primary regulator for such activities.
Accordingly, its trading activities are subject to the NFA’s financial requirements and it is required to maintain net capital that is in excess of or equal to the greatest of NFA’s minimum financial requirements. The NFA was designated by the Commodity Futures Trading Commission as LPL Financial’s primary regulator for such activities.
Operational Risk Operational risk is defined as the risk of loss resulting from failed or inadequate processes or systems, actions by people or external events.
Operational risk is defined as the risk of loss resulting from failed or inadequate processes or systems, actions by people or external events.
Expense Advisory and Commission Advisory and commission expense consists of the following: payout amounts that are earned by and paid out to advisors and enterprises based on advisory and commission revenue earned on each client’s account, production-based bonuses earned by advisors and enterprises based on the levels of advisory and commission revenue they produce, compensation and benefits paid to employee advisors, the recognition of share-based compensation expense from equity awards granted to advisors and enterprises based on the fair value of the awards at grant date and the deferred advisory and commission fee expense associated with mark-to-market gains or losses on the non-qualified deferred compensation plan offered to our advisors.
Expense Advisory and Commission Advisory and commission expense consists of the following: payout amounts that are earned by and paid out to advisors and enterprises based on advisory and commission revenue earned on each client’s account, production-based bonuses earned by advisors and enterprises based on the levels of advisory and commission revenue they produce, compensation and benefits paid to employee advisors, share-based compensation expense from equity awards granted to advisors and enterprises based on the fair value of the awards at grant date and the deferred advisory and commission fee expense associated with mark-to-market gains or losses on the non-qualified deferred compensation plan offered to our advisors.
The timing and amount of share repurchases, if any, is determined at our discretion within the constraints of our Credit Agreement, the Indentures, applicable laws and consideration of our general liquidity needs. See Note 15 - Stockholders’ Equity , within the notes to the consolidated financial statements for additional information regarding our share repurchases.
The timing and amount of share repurchases, if any, is determined at our discretion within the constraints of our Credit Agreement, applicable laws and consideration of our general liquidity needs. See Note 15 - Stockholders’ Equity , within the notes to the consolidated financial statements for additional information regarding our share repurchases.
We regularly evaluate our existing indebtedness, including potential refinancing opportunities, based on a number of factors, including our capital requirements, future prospects, contractual restrictions, the availability of refinancing on attractive terms and general market conditions.
We regularly evaluate our existing indebtedness, including potential issuances and refinancing opportunities, based on a number of factors, including our capital requirements, future prospects, contractual restrictions, the availability of refinancing on attractive terms and general market conditions.
(2) Consists of total advisory and brokerage assets under custody at the Company’s broker-dealer subsidiary, LPL Financial. Please consult the “ Results of Operations” section for a tabular presentation of advisory and brokerage assets.
(2) Consists of total advisory and brokerage assets under custody at the Company’s primary broker-dealer subsidiary, LPL Financial. Please consult the “ Results of Operations” section for a tabular presentation of advisory and brokerage assets.
Interest Expense on Borrowings Interest expense on borrowings includes the interest associated with the Company’s senior notes, senior secured Term Loan B (“Term Loan B”), amortization of debt issuance costs and fees associated with the Company’s revolving lines of credit.
Interest Expense on Borrowings Interest expense on borrowings includes the interest associated with the Company’s senior notes, senior secured Term Loan B (“Term Loan B”) and revolving credit facilities; amortization of debt issuance costs; and fees associated with the Company’s revolving lines of credit.
As of December 31, 2022, we were in compliance with our Credit Agreement financial covenants, which include a maximum Consolidated Total Debt to Consolidated EBITDA Ratio (as defined in the Credit Agreement) or “Leverage Ratio” and a minimum Consolidated EBITDA to Consolidated Interest Expense Ratio (as defined in the Credit Agreement) or “Interest Coverage.” The breach of these financial covenants would be subject to certain equity cure rights.
As of December 31, 2023, we were in compliance with our Credit Agreement financial covenants, which include a maximum Consolidated Total Debt to Consolidated EBITDA Ratio (as defined in the Credit Agreement) or “Leverage Ratio” and a minimum Consolidated EBITDA to Consolidated Interest Expense Ratio (as defined in the Credit Agreement) or “Interest Coverage.” The breach of these financial covenants would be subject to certain equity cure rights.
We also generate asset-based revenue through our insured bank sweep vehicles, money market account balances and the access we provide to a variety of product providers with the following product lines: • Alternative Investments • Retirement Plan Products • Annuities • Separately Managed Accounts • Exchange Traded Products • Structured Products • Insurance Based Products • Unit Investment Trusts • Mutual Funds Under our self-clearing platform, we custody the majority of client assets invested in these financial products, for which we provide statements, transaction processing and ongoing account management.
We also generate asset-based revenue through our insured bank sweep vehicles, money market account balances and the access we provide to a variety of product providers with the following product lines: • Alternative Investments • Retirement Plan Products • Annuities • Separately Managed Accounts • Exchange Traded Products • Structured Products • Insurance Based Products • Unit Investment Trusts • Mutual Funds 38 Table of Contents Under our self-clearing platform, we custody the majority of client assets invested in these financial products, for which we provide statements, transaction processing and ongoing account management.
(11) EBITDA is a non-GAAP financial measure defined as net income plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles. The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations.
(10) EBITDA is a non-GAAP financial measure defined as net income plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles. The Company presents EBITDA because management believes that it can be a useful financial metric in understanding the Company’s earnings from operations.
(4) Represents interest payments under our Credit Agreement, which include a variable interest payment for our senior secured credit facilities and a fixed interest payment for our senior unsecured notes. Variable interest payments assume the applicable interest rates at December 31, 2022 remain unchanged.
(4) Represents interest payments under our Credit Agreement, which include a variable interest payment for our senior secured credit facilities and a fixed interest payment for our senior unsecured notes. Variable interest payments assume the applicable interest rates at December 31, 2023 remain unchanged.
Sales-based commission revenue, which occurs when clients trade securities or purchase various types of investment products, primarily represents gross commissions generated by our advisors and can vary from period to period based on the overall economic environment, number of trading days in the reporting period and investment activity of our advisors’ clients.
Sales-based commission revenue, which occurs when 46 Table of Contents clients trade securities or purchase various types of investment products, primarily represents gross commissions generated by our advisors and can vary from period to period based on the overall economic environment, number of trading days in the reporting period and investment activity of our advisors’ clients.
Advisory revenue collected on our corporate RIA advisory platform is proposed by the advisor and agreed to by the client and was approximately 1% of the underlying assets for the year ended December 31, 2022.
Advisory revenue collected on our corporate RIA advisory platform is proposed by the advisor and agreed to by the client and was approximately 1% of the underlying assets for the year ended December 31, 2023.
Management exercises judgment to estimate revenue accruals. In particular, our trailing commission revenue, included in commission revenue on the consolidated statements of income, is generally received in arrears and therefore requires our management to estimate accrued amounts based on revenue received in prior periods, market performance and payment frequency of each product type or sponsor.
In particular, our trailing commission revenue, included in commission revenue on the consolidated statements of income, is generally received in arrears and therefore requires management to estimate accrued amounts based on revenue received in prior periods, market performance and payment frequency of each product type or sponsor.
The Credit Agreement defines Credit Agreement EBITDA as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments (including unusual or non-recurring charges) and gains, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions.
The Credit Agreement defines Credit Agreement EBITDA as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions.
Commission We generate two types of commission revenue: (1) sales-based commissions that are recognized at the point of sale on the trade date and are based on a percentage of an investment product’s current market value at the time of purchase and (2) trailing commissions that are recognized over time as earned and are generally based on the 44 Table of Content s market value of investment holdings in trail-eligible assets.
Commission We generate two types of commission revenue: (1) sales-based commissions that are recognized at the point of sale on the trade date and are based on a percentage of an investment product’s current market value at the time of purchase and (2) trailing commissions that are recognized over time as earned and are generally based on the market value of investment holdings in trail-eligible assets.
Credit Agreement EBITDA, a non-GAAP measure, is defined by the Credit Agreement as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments (including unusual or non-recurring charges) and gains, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions .
Credit Agreement EBITDA, a non-GAAP financial measure, is defined by the Credit Agreement as “Consolidated EBITDA,” which is Consolidated Net Income (as defined in the Credit Agreement) plus interest expense on borrowings, provision for income taxes, depreciation and amortization, and amortization of other intangibles, and is further adjusted to exclude certain non-cash charges and other adjustments, and to include future expected cost savings, operating expense reductions or other synergies from certain transactions .
The subcommittees meet regularly and are responsible for keeping the ROC informed and escalating issues in accordance with the Company’s escalation policies.
The subcommittees meet regularly and are responsible for keeping the ROC informed and escalating issues in accordance with the Company’s escalation protocols.
Risk Factors” for more information about the risks associated with significant interest rate changes and the potential related effects on our profitability and financial condition. 42 Table of Content s Results of Operations A discussion of changes in our results of operations during the year ended December 31, 2021 compared to the year ended December 31, 2020 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
Risk Factors” for more information about the risks associated with significant interest rate changes and the potential related effects on our profitability and financial condition. 44 Table of Contents Results of Operations A discussion of changes in our results of operations during the year ended December 31, 2022 compared to the year ended December 31, 2021 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 22, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 23, 2023.
The members of the ROC include certain Managing Directors of LPL Financial, as well as other members of LPL Financial’s senior management team who serve as ex- 52 Table of Content s officio members and represent key control areas of the Company.
The members of the ROC include certain Managing Directors of LPL Financial, as well as other members of LPL Financial’s senior management team who serve as ex-officio members and represent key control areas of the Company.
Primary ownership for risk and control processes is with the business units and control owners, who are the first line of defense in effectively managing risks, and who are responsible for day-to-day compliance and risk management, including execution of operating and supervisory procedures, as well as training manuals (desktop procedures).
Primary ownership for risk and control processes is with the business units and control owners, who are the first line of defense in effectively managing risks, and who are responsible for day-to-day compliance and risk management, including execution of operating and supervisory procedures.
(13) See the “Liquidity and Capital Resources” section for additional information about Corporate Cash.
(12) See the “Liquidity and Capital Resources” section for additional information about Corporate Cash.
Recently Issued Accounting Pronouncements Refer to Note 2 - Summary of Significant Accounting Policies, within the notes to the consolidated financial statements for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us. 54 Table of Content s
Recently Issued Accounting Pronouncements Refer to Note 2 - Summary of Significant Accounting Policies, within the notes to the consolidated financial statements for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us. 58 Table of Contents
We believe Corporate Cash is a useful measure of the Parent’s liquidity as it represents the capital available for use in excess of the amount we are required to reserve pursuant to the Credit Agreement.
We believe Corporate Cash, a component of cash and equivalents, is a useful measure of the Parent’s liquidity as it represents the capital available for use in excess of the amount we are required to maintain pursuant to the Credit Agreement.
Adjusted net income and EPS prior to amortization of intangible assets and acquisition costs are not measures of the Company's financial performance under GAAP and should not be considered as alternatives to net income, earnings per diluted share or any other performance measure derived in accordance with GAAP.
Adjusted net income and adjusted EPS are not measures of the Company's financial performance under GAAP and should not be considered as alternatives to net income, earnings per diluted share or any other performance measure derived in accordance with GAAP.
(7) Calculated based on the end of period total advisory and brokerage assets divided by the end of period advisor count. 39 Table of Content s (8) The leverage ratio is a financial metric from our Credit Agreement and is calculated by dividing Credit Agreement net debt, which equals consolidated total debt less Corporate Cash, by Credit Agreement EBITDA.
(6) Calculated based on the end of period total advisory and brokerage assets divided by the end of period advisor count. 41 Table of Contents (7) The leverage ratio is a financial metric from our Credit Agreement and is calculated by dividing Credit Agreement net debt, which equals consolidated total debt less Corporate Cash, by Credit Agreement EBITDA.
Depreciation and amortization expense for the year ended December 31, 2022 increased by $48.4 million compared to 2021, primarily due to our continued investment in technology to support the integrations, enhance our advisor platform and experience, and support onboarding of enterprises.
Depreciation and amortization expense for the year ended December 31, 2023 increased by $47.2 million compared to 2022, primarily due to our continued investment in technology to support the integrations, enhance our advisor platform and experience, and support onboarding of enterprises.
The following table summarizes activity impacting advisory assets for the periods presented (in billions): Years Ended December 31, 2022 2021 Beginning balance at January 1 $ 643.2 $ 461.2 Net new advisory assets (1) 52.4 123.5 Market impact (2) (112.5) 58.5 Ending balance at December 31 $ 583.1 $ 643.2 ____________________ (1) Net new advisory assets consist of total client deposits into custodied advisory accounts less total client withdrawals from custodied advisory accounts, plus dividends, plus interest, minus advisory fees.
The following table summarizes activity impacting advisory assets for the periods presented (in billions): Years Ended December 31, 2023 2022 Beginning balance at January 1 $ 583.1 $ 643.2 Net new advisory assets (1) 76.0 52.4 Market impact (2) 76.7 (112.5) Ending balance at December 31 $ 735.8 $ 583.1 ____________________ (1) Net new advisory assets consist of total client deposits into custodied advisory accounts less total client withdrawals from custodied advisory accounts, plus dividends, plus interest, minus advisory fees.
(12) Core G&A is a non-GAAP financial measure defined as total expense less the following expenses: advisory and commission; depreciation and amortization; interest expense on borrowings; brokerage, clearing and exchange; amortization of other intangibles; loss on extinguishment of debt; promotional (ongoing); acquisition costs; regulatory charges; and employee share-based compensation.
(11) Core G&A is a non-GAAP financial measure defined as total expense less the following expenses: advisory and commission; depreciation and amortization; interest expense on borrowings; brokerage, clearing and exchange; amortization of other intangibles; market fluctuations on employee deferred compensation; promotional (ongoing); employee share-based compensation; regulatory charges; and acquisition costs.
Interest Income, net We earn interest income primarily from client margin loans, CCA balances segregated under federal or other regulations and advisor repayable loans.
Interest Income, net We earn interest income primarily from client margin loans, client cash account (“CCA”) balances segregated under federal or other regulations and advisor repayable loans.
Interest income, net for the year ended December 31, 2022 increased compared to 2021, primarily due to higher interest earned on margin loans, bank deposits and short-term U.S. treasury bills, partially offset by interest paid on CCA balances.
Interest income, net for the year ended December 31, 2023 increased compared to 2022, primarily due to increases in interest earned on bank deposits, short-term U.S. treasury bills and margin loans, partially offset by an increase in interest paid on CCA balances.
The following table summarizes activity impacting brokerage assets for the periods presented (in billions): Years Ended December 31, 2022 2021 Beginning balance at January 1 $ 563.2 $ 441.9 Net new brokerage assets (1) 43.5 66.6 Market impact (2) (79.0) 54.7 Ending balance at December 31 $ 527.7 $ 563.2 ____________________ (1) Net new brokerage assets consist of total client deposits into brokerage accounts less total client withdrawals from brokerage accounts, plus dividends, plus interest.
The following table summarizes activity impacting brokerage assets for the periods presented (in billions): Years Ended December 31, 2023 2022 Beginning balance at January 1 $ 527.7 $ 563.2 Net new brokerage assets (1) 28.1 43.5 Market impact (2) 62.4 (79.0) Ending balance at December 31 $ 618.2 $ 527.7 ____________________ (1) Net new brokerage assets consist of total client deposits into brokerage accounts less total client withdrawals from brokerage accounts, plus dividends, plus interest.
The Company presents adjusted net income and EPS prior to amortization of intangible assets and acquisition costs because management believes that these metrics can provide investors with useful insight into the Company’s core operating performance by excluding non-cash items and acquisition costs that management does not believe impact the Company’s ongoing operations.
The Company presents adjusted net income and adjusted EPS because management believes that these metrics can provide investors with useful insight into the Company’s core operating performance by excluding non-cash items, acquisition costs and a regulatory charge that management does not believe impact the Company’s ongoing operations.
Asset Trends Total advisory and brokerage assets served were $1.1 trillion at December 31, 2022, compared to $1.2 trillion at December 31, 2021. Total net new assets were $95.9 billion for the year ended December 31, 2022, compared to $190.0 billion for the same period in 2021.
Asset Trends Total advisory and brokerage assets served were $1.4 trillion at December 31, 2023, compared to $1.1 trillion at December 31, 2022. Total net new assets were $104.1 billion for the year ended December 31, 2023, compared to $95.9 billion for the same period in 2022.
The following table sets forth our average number of employees for the periods presented : Years Ended December 31, 2022 2021 % Change Average number of employees 6,524 5,283 23% Compensation and benefits expense for the year ended December 31, 2022 increased by $79.7 million compared to 2021, primarily due to an increase in headcount. 46 Table of Content s Promotional Promotional expense includes business development costs related to advisor recruitment and retention, costs related to hosting certain advisory conferences that serve as training, sales and marketing events, and other costs that support advisor business growth.
The following table sets forth our average number of employees for the periods presented : Years Ended December 31, 2023 2022 % Change Average number of employees 7,669 6,524 18% Compensation and benefits expense for the year ended December 31, 2023 increased by $158.9 million compared to 2022, primarily due to an increase in headcount. 48 Table of Contents Promotional Promotional expense includes business development costs related to advisor recruitment and retention, costs related to hosting certain advisory conferences that serve as training, sales and marketing events, and other costs that support advisor business growth.
March 2026 $ — $ 1,000 Broker-dealer revolving credit facility LPL Financial LLC August 2023 $ — $ 1,000 Unsecured, uncommitted lines of credit LPL Financial LLC September 2023 $ — $ 75 Unsecured, uncommitted lines of credit LPL Financial LLC September 2023 $ — $ 50 Unsecured, uncommitted lines of credit LPL Financial LLC None $ — $ 75 Secured, uncommitted lines of credit LPL Financial LLC None $ — unspecified Secured, uncommitted lines of credit LPL Financial LLC None $ — unspecified 49 Table of Content s Capital Resources The Company seeks to manage capital levels in support of its business strategy of generating and effectively deploying capital for the benefit of our stockholders.
March 2026 $ 280 $ 1,720 Broker-dealer revolving credit facility LPL Financial LLC July 2024 $ — $ 1,000 Unsecured, uncommitted lines of credit LPL Financial LLC None $ — $ 75 Unsecured, uncommitted lines of credit LPL Financial LLC September 2024 $ — $ 50 Secured, uncommitted lines of credit LPL Financial LLC March 2025 $ — $ 75 Secured, uncommitted lines of credit LPL Financial LLC None $ — unspecified Secured, uncommitted lines of credit LPL Financial LLC None $ — unspecified Capital Resources The Company seeks to manage capital levels in support of its business strategy of generating and effectively deploying capital for the benefit of our stockholders.
Business” for additional information related to our business activities. 36 Table of Content s Our Sources of Revenue Our revenue is derived primarily from fees and commissions from products and advisory services offered by our advisors to their clients, a substantial portion of which we pay out to our advisors, as well as fees we receive from our advisors for the use of our technology, custody, clearing, trust and reporting platforms.
Our Sources of Revenue Our revenue is derived primarily from fees and commissions from products and advisory services offered by our advisors to their clients, a substantial portion of which we pay out to our advisors, as well as fees we receive from our advisors for the use of our technology, custody, clearing, trust and reporting platforms.
Networking revenue on brokerage assets is correlated to the number of positions we administer and is paid to us by mutual fund product sponsors and annuity product manufacturers. Asset-based revenue for the year ended December 31, 2022 increased b y $612.2 million compared to 2021, primarily due to an increase in client cash revenue.
Networking revenue on brokerage assets is correlated to the number of positions we administer and is paid to us by mutual fund product sponsors and annuity product manufacturers. Asset-based revenue for the year ended December 31, 2023 increased by $617.5 million compared to 2022, primarily d ue to an increase in client cash revenue.
We enable them to provide personalized financial guidance to millions of American families seeking wealth management, retirement planning, financial planning and asset management solutions. Please consult Part I, “Item 1.
We enable them to provide personalized financial guidance to millions of American families seeking wealth management, retirement planning, financial planning and asset management solutions. Please consult Part I, “Item 1. Business” for information related to our business activities.
External Liquidity Sources The following table presents amounts outstanding and available under our external lines of credit at December 31, 2022 (in millions): Description Borrower Maturity Date Outstanding Available Senior secured, revolving credit facility LPL Holdings, Inc.
LPL Financial also maintains a line of credit with the Parent. External Liquidity Sources The following table presents amounts outstanding and available under our external lines of credit at December 31, 2023 (in millions): Description Borrower Maturity Date Outstanding Available Senior secured, revolving credit facility LPL Holdings, Inc.
However, the advisory revenue generated by an Independent RIA is not included in our advisory revenue. We charge separate fees to Independent RIAs for technology, clearing, administrative, oversight and custody services, which may vary and are included in our Service and fee revenue in our consolidated statements of income.
We charge separate fees to Independent RIAs for technology, clearing, administrative, oversight and custody services, which may vary and are included in our service and fee revenue in our consolidated statements of income.
Below is a reconciliation of net income to EBITDA for the periods presented (in millions): Years Ended December 31, EBITDA Reconciliation 2022 2021 Net income $ 845.7 $ 459.9 Interest expense on borrowings 126.2 104.4 Provision for income taxes 266.0 141.5 Depreciation and amortization 199.8 151.4 Amortization of other intangibles 87.6 79.3 EBITDA (†) $ 1,525.3 $ 936.4 ____________________ (†) Totals may not foot due to rounding.
Below is a reconciliation of net income to EBITDA for the periods presented (in millions): Years Ended December 31, EBITDA Reconciliation 2023 2022 Net income $ 1,066.3 $ 845.7 Interest expense on borrowings 186.8 126.2 Provision for income taxes 378.5 266.0 Depreciation and amortization 247.0 199.8 Amortization of other intangibles 107.2 87.6 EBITDA (†) $ 1,985.8 $ 1,525.3 ____________________ (†) Totals may not foot due to rounding.
These timing differences are funded either with internally generated cash flows or, if needed, with funds drawn on our uncommitted lines of credit at LPL Financial or one of our revolving credit facilities. LPL Financial is subject to the SEC’s Uniform Net Capital Rule, which requires the maintenance of minimum net capital.
These capital requirements are funded either with internally generated cash flows or, if needed, with funds drawn on our uncommitted lines of credit at LPL Financial or one of our revolving credit facilities. Our broker-dealer subsidiaries are subject to the SEC’s Uniform Net Capital Rule (Rule 15c3-1 under the Exchange Act), which requires the maintenance of minimum net capital.
Bureau of Economic Analysis, the U.S. economy grew 2.1% in 2022, and at an annualized pace of 2.7% in the fourth quarter of 2022 after growing at an annualized pace of 3.2% in the third quarter of 2022.
Bureau of Economic Analysis, the U.S. economy grew 2.5% in 2023, and at an annualized pace of 3.3% in the fourth quarter of 2023 after growing at an annualized pace of 4.9% in the third quarter of 2023.
The Chief Risk Officer provides updates on pertinent ROC discussions to the Audit and Risk Committee on a regular basis and, if necessary or requested, to the Board. Subcommittees of the Risk Oversight Committee The ROC has established multiple subcommittees that cover key areas of risk.
The chief risk officer provides updates on pertinent ROC discussions to the Audit and Risk Committee on a regular basis and, if necessary or requested, to the Board. Subcommittees of the Risk Oversight Committee The ROC has established multiple subcommittees to support effective supervision of our risk exposures and processes.
Below is a calculation of gross profit for the periods presented (in millions): Years Ended December 31, Gross Profit 2022 2021 Total revenue $ 8,600.8 $ 7,720.8 Advisory and commission expense 5,324.8 5,180.1 Brokerage, clearing and exchange expense 86.1 86.0 Gross Profit (†) $ 3,189.9 $ 2,454.7 ____________________ (†) Totals may not foot due to rounding.
Below is a calculation of gross profit for the periods presented (in millions): Years Ended December 31, Gross Profit 2023 2022 Total revenue $ 10,052.8 $ 8,600.8 Advisory and commission expense 5,915.8 5,324.8 Brokerage, clearing and exchange expense 106.0 86.1 Employee deferred compensation (16) 4.1 — Gross Profit (†) $ 4,027.0 $ 3,189.9 ____________________ (†) Totals may not foot due to rounding.
Other revenue for the year ended December 31, 2022 decreased by $158.5 million compared to 2021, primarily due to realized and unrealized losses on assets held in our advisor non-qualified deferred compensation plan, which are based on the market performance of the underlying investment allocations chosen by advisors in the plan.
Other revenue for the year ended December 31, 2023 increased by $205.6 million compared to 2022, primarily due to unrealized gains on assets held in our advisor non-qualified deferred compensation plan, which are based on the market performance of the underlying investment allocations chosen by advisors in the plan, and a related increase in dividend income on assets held in our advisor non-qualified deferred compensation plan.
Dividends from and excess capital generated by LPL Financial are the primary sources of liquidity. Subject to regulatory approval or notification, capital generated by regulated subsidiaries can be distributed to the Parent to the extent the capital levels exceed regulatory requirements, Credit Agreement requirements and internal capital thresholds.
Dividends from and excess capital generated by LPL Financial are primarily generated through our cash flow from operations. Subject to regulatory approval or notification, capital generated by regulated subsidiaries can be distributed to the Parent to the extent the capital levels exceed regulatory requirements and internal capital thresholds.
Below are reconciliations of corporate debt and other borrowings to Credit Agreement net debt as of the dates below and net income to EBITDA and Credit Agreement EBITDA for the periods presented below (in millions): December 31, Credit Agreement Net Debt Reconciliation 2022 2021 Corporate debt and other borrowings $ 2,737.9 $ 2,838.6 Corporate Cash (13) (459.4) (237.0) Credit Agreement Net Debt (†) $ 2,278.5 $ 2,601.6 Years Ended December 31, EBITDA and Credit Agreement EBITDA Reconciliation 2022 2021 Net income $ 845.7 $ 459.9 Interest expense on borrowings 126.2 104.4 Provision for income taxes 266.0 141.5 Depreciation and amortization 199.8 151.4 Amortization of other intangibles 87.6 79.3 EBITDA (†) $ 1,525.3 $ 936.4 Credit Agreement Adjustments: Acquisition costs and other $ 50.7 $ 92.1 Employee share-based compensation 50.1 41.8 M&A accretion (14) 10.6 53.6 Advisor share-based compensation 2.5 2.3 Loss on extinguishment of debt — 24.4 Credit Agreement EBITDA (†) $ 1,639.1 $ 1,150.7 December 31, 2022 2021 Leverage Ratio 1.39 2.26 ____________________ (†) Totals may not foot due to rounding.
Below are reconciliations of corporate debt and other borrowings to Credit Agreement net debt as of the dates below and net income to EBITDA and Credit Agreement EBITDA for the periods presented (in millions): December 31, Credit Agreement Net Debt Reconciliation 2023 2022 Corporate debt and other borrowings $ 3,757.2 $ 2,737.9 Corporate Cash (12) (183.7) (459.4) Credit Agreement Net Debt (†) $ 3,573.5 $ 2,278.5 Years Ended December 31, EBITDA and Credit Agreement EBITDA Reconciliation 2023 2022 Net income $ 1,066.3 $ 845.7 Interest expense on borrowings 186.8 126.2 Provision for income taxes 378.5 266.0 Depreciation and amortization 247.0 199.8 Amortization of other intangibles 107.2 87.6 EBITDA (†) $ 1,985.8 $ 1,525.3 Credit Agreement Adjustments: Acquisition costs and other (13)(14) $ 110.2 $ 50.7 Employee share-based compensation 66.0 50.1 M&A accretion (15) 30.3 10.6 Advisor share-based compensation 2.6 2.5 Credit Agreement EBITDA (†) $ 2,194.8 $ 1,639.1 December 31, 2023 2022 Leverage Ratio 1.63 1.39 ____________________ (†) Totals may not foot due to rounding.
(“Waddell & Reed”). See Note 4 - Acquisitions , within the notes to the consolidated financial statements for further detail. Economic Overview and Impact of Financial Market Events Our business is directly and indirectly sensitive to several macroeconomic factors and the state of the financial markets in the United States. According to the most recent estimate from the U.S.
Economic Overview and Impact of Financial Market Events Our business is directly and indirectly sensitive to several macroeconomic factors and the state of the financial markets in the United States. According to the most recent estimate from the U.S.
Transaction revenue for the year ended December 31, 2022 increased by $24.9 million compared to 2021, primarily due to increases in the number of transactions and transaction charges for managed assets, mutual funds and fixed income products.
Transaction revenue for the year ended December 31, 2023 increased by $18.7 million compared to 2022, primarily due to increases in the number of transactions and transaction charges for fixed income products, partially offset by a decrease in charges for managed assets.
We may sometimes be required to fund timing differences arising from the delayed receipt of client funds associated with the settlement of client transactions in securities markets and cash sweep balances held at third-party banks.
We may sometimes be required to fund capital requirements necessary to effect client transactions in securities markets and cash sweep balances held at third-party banks that arise from the delayed receipt of client funds.
Below is a reconciliation of net income and earnings per diluted share to adjusted net income and EPS prior to amortization of intangible assets and acquisition costs for the periods presented (in millions, except per share data): Years Ended December 31, 2022 2021 Adjusted net income / EPS prior to amortization of intangible assets and acquisition costs Reconciliation Amount Per Share Amount Per Share Net income / earnings per diluted share $ 845.7 $ 10.40 $ 459.9 $ 5.63 Amortization of other intangibles 87.6 1.08 79.3 0.97 Acquisition costs (15) 36.2 0.44 76.4 0.93 Tax benefit (32.7) (0.40) (41.4) (0.51) Adjusted net income / EPS prior to amortization of intangible assets and acquisition costs (†) $ 936.7 $ 11.52 $ 574.1 $ 7.02 Weighted-average shares outstanding, diluted 81.3 81.7 ____________________ (†) Totals may not foot due to rounding. 40 Table of Content s (10) Gross profit is a non-GAAP financial measure defined as total revenue less advisory and commission expense and brokerage, clearing and exchange expense.
Below is a reconciliation of net income and earnings per diluted share to adjusted net income and adjusted EPS for the periods presented (in millions, except per share data): Years Ended December 31, 2023 2022 Adjusted Net Income / Adjusted EPS Reconciliation Amount Per Share Amount Per Share Net income / earnings per diluted share $ 1,066.3 $ 13.69 $ 845.7 $ 10.40 Regulatory charge (13) 40.0 0.51 — — Amortization of other intangibles 107.2 1.38 87.6 1.08 Acquisition costs (14) 48.1 0.62 36.2 0.44 Tax benefit (37.4) (0.48) (32.7) (0.40) Adjusted Net Income / Adjusted EPS (†) $ 1,224.1 $ 15.72 $ 936.7 $ 11.52 Weighted-average shares outstanding, diluted 77.9 81.3 ____________________ (†) Totals may not foot due to rounding. 42 Table of Contents (9) Gross profit is a non-GAAP financial measure defined as total revenue less advisory and commission expense; brokerage, clearing and exchange expense; and market fluctuations on employee deferred compensation.
Below is a reconciliation of the Company’s total expense to core G&A for the periods presented (in millions): Years Ended December 31, Core G&A Reconciliation 2022 2021 Total expense $ 7,489.2 $ 7,119.5 Advisory and commission 5,324.8 5,180.1 Depreciation and amortization 199.8 151.4 Interest expense on borrowings 126.2 104.4 Amortization of other intangibles 87.6 79.3 Brokerage, clearing and exchange 86.1 86.0 Loss on extinguishment of debt — 24.4 Total G&A (†) 1,664.7 1,493.9 Promotional (ongoing) (15)(16) 353.9 288.0 Employee share-based compensation 50.1 41.8 Acquisition costs (15) 36.2 76.4 Regulatory charges 32.6 29.4 Core G&A (†) $ 1,191.9 $ 1,058.2 ____________________ (†) Totals may not foot due to rounding.
Below is a reconciliation of the Company’s total expense to core G&A for the periods presented (in millions): Years Ended December 31, Core G&A Reconciliation 2023 2022 Total expense $ 8,608.1 $ 7,489.2 Advisory and commission (5,915.8 ) (5,324.8 ) Depreciation and amortization (247.0 ) (199.8 ) Interest expense on borrowings (186.8 ) (126.2 ) Amortization of other intangibles (107.2 ) (87.6 ) Brokerage, clearing and exchange (106.0 ) (86.1 ) Employee deferred compensation (16) (4.1 ) — Total G&A (†) 2,041.2 1,664.7 Promotional (ongoing) (14)(17) (486.3 ) (353.9 ) Regulatory charges (13) (71.3 ) (32.6 ) Employee share-based compensation (66.0 ) (50.1 ) Acquisition costs (14) (48.1 ) (36.2 ) Core G&A (†) $ 1,369.4 $ 1,191.9 ____________________ (†) Totals may not foot due to rounding.
For the year ended December 31, 2022 promotional expense increased by $37.7 million compared to 2021, primarily due to increases in recruited assets and advisors that led to higher costs to support transition assistance and retention, as well as increases in conference spend as we returned to in-person events.
Promotional expense for the year ended December 31, 2023 increased by $119.2 million compared to 2022, primarily due to increases in recruited assets and advisors that led to higher costs to support transition assistance and retention.
In addition to the ERM framework, we also have written policies and procedures that govern the conduct of business by our advisors, employees and the terms and conditions of our relationships with product manufacturers.
We regularly reevaluate and, when necessary, modify our processes to improve the identification and escalation of risks and events. 55 Table of Contents In addition to the ERM framework, we also have written policies and procedures that govern the conduct of business by our advisors, employees and the terms and conditions of our relationships with product manufacturers.
We consider the following critical accounting policies to be most significant because they involve a higher degree of judgment and complexity and require management to make estimates regarding matters that are uncertain and susceptible to change where such change may result in a material adverse impact on our financial condition or results of operations. 53 Table of Content s Revenue Recognition Revenue is recognized when control of the promised service is transferred to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those services.
We consider the following critical accounting policies to be most significant because they involve a higher degree of judgment and complexity and require management to make estimates regarding matters that are uncertain and susceptible to change where such change may result in a material adverse impact on our financial condition or results of operations.
Client cash revenue for the year ended December 31, 2022 increased compared to 2021 due to increases to the federal funds effective rate and higher average client cash balances. For the year ended December 31, 2022, our average client cash balances increased to $61.9 billion compared to $47.5 billion for the year ended December 31, 2021.
Client cash revenue for the year ended December 31, 2023 increased compared to 2022 due to increases to the federal funds effective rate, partially offset by lower average client cash balances. For the year ended December 31, 2023, our average client cash balances decreased to $48.8 billion compared to $61.9 billion for the year ended December 31, 2022.
For example, we regularly review the structure and fees of our products and services, including related disclosures, in the context of the changing regulatory environment and competitive landscape for advisory and brokerage accounts.
For example, we regularly review the structure and fees of our products and services, including related disclosures, in the context of the changing regulatory environment and competitive landscape for advisory and brokerage accounts. Significant Events Entered into a definitive purchase agreement to acquire Atria Wealth Solutions, Inc.
Advisory revenue increased during the year ended December 31, 2022 as compared to the same period in 2021. The increase during the year ended December 31, 2022 was driven primarily by continued organic growth and the full year impact of Waddell & Reed assets, partially offset by a decline in advisory asset balances due to market changes.
Advisory revenue increased during the year ended December 31, 2023 as compared to the same period in 2022. The increase during the year ended December 31, 2023 was driven by continued organic growth, which increased advisory asset balances during the period, and a positive market impact as compared to the prior period.
Risk Oversight Committee of LPL Financial The Audit and Risk Committee has mandated that the ROC oversee our risk management activities, including those of our subsidiaries. The Chief Risk Officer of LPL Financial serves as chair of the ROC, which generally meets on a quarterly basis with additional ad hoc meetings as necessary.
Risk Oversight Committee of LPL Financial The ROC, a management committee chaired by the chief risk officer, oversees our risk management activities, including those of our subsidiaries. The chief risk officer of LPL Financial serves as chair of the ROC, which generally meets once every two months, with additional ad hoc meetings as necessary.
The following table summarizes the composition of advisory assets for the periods presented (in billions): December 31, 2022 2021 $ Change % Change Corporate advisory assets $ 389.1 $ 429.6 $ (40.5) (9) % Independent RIA advisory assets 194.0 213.6 (19.6) (9) % Total advisory assets $ 583.1 $ 643.2 $ (60.1) (9) % Net new advisory assets are generated throughout the quarter, therefore, the full impact of net new advisory assets to advisory revenue is not realized in the same period.
The following table summarizes the composition of advisory assets for the periods presented (in billions): December 31, 2023 2022 $ Change % Change Corporate advisory assets $ 496.5 $ 389.1 $ 107.4 28 % Independent RIA advisory assets 239.3 194.0 45.3 23 % Total advisory assets $ 735.8 $ 583.1 $ 152.7 26 % Net new advisory assets are generated throughout the quarter, therefore, the full impact of net new advisory assets to advisory revenue is not realized in the same period.
LPL Financial computes net capital requirements under the alternative method, which requires firms to maintain minimum net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from client transactions. At December 31, 2022, LPL Financial had net capital of $49.5 million with a minimum net capital requirement of $13.3 million.
LPL Financial, our primary broker-dealer subsidiary, computes net capital requirements under the alternative method, which requires firms to maintain minimum net capital equal to the greater of $250,000 or 2% of aggregate debit balances arising from client transactions.
The following table sets forth our payout rate, which is a statistical or operating measure, for the periods presented: Years Ended December 31, 2022 2021 Change Payout rate 87.32 % 86.74 % 58 bps Our payo ut rate increased for the year ended December 31, 2022 compared to 2021 due to increases in sales of higher-payout products and the impact of onboarding of enterprises during the year.
The following table sets forth our payout rate, which is a statistical or operating measure, for the periods presented: Years Ended December 31, 2023 2022 Change Payout rate 86.97 % 87.32 % (35) bps Our payo ut rate decreased fo r the year ended December 31, 2023 compared to 2022, primarily due to the effect of acquisitions during the year and changes in product mix.
LPL Financial’s ability to pay dividends greater than 10% of its excess net capital during any 35-day rolling period requires approval from FINRA. In addition, payment of dividends is restricted if LPL Financial’s net capital would be less than 5% of aggregate customer debit balances. LPL Financial also acts as an introducing broker-dealer for commodities and futures.
In addition, each broker-dealer subsidiary’s ability to pay dividends would be restricted if its net capital would be less than 5% of aggregate customer debit balances. 52 Table of Contents LPL Financial also acts as an introducing broker-dealer for commodities and futures.
A valuation allowance is established to the extent that it is more likely than not that such deferred tax assets will not be realized.
These temporary differences result in deferred tax assets and liabilities, which we must then assess the likelihood that the deferred tax assets will be realized. A valuation allowance is established to the extent that it is more likely than not that such deferred tax assets will not be realized.
Internal Audit reports directly to the Audit and Risk Committee, which provides oversight of Internal Audit’s activities and approves its annual plan. The Internal Audit department provides regular updates to the ROC and reports to the Audit and Risk Committee at least quarterly.
Internal Audit reports directly to the ARC, which provides oversight of Internal Audit’s activities and approves its annual plan. The Internal Audit department reports to the ARC at least quarterly. 56 Table of Contents Operational Risk Operational Risk is reviewed, monitored and challenged by the Operational Risk Oversight Committee (the “OROC”), which is a subcommittee of the ROC.
Net new advisory assets were an inflow of $52.4 billion for the year ended December 31, 2022, compared to $123.5 billion in 2021. Advisory assets were $583.1 billion, or 52.5% of total advisory and brokerage assets served, at December 31, 2022, down 9% from $643.2 billion at December 31, 2021.
Net new advisory assets were $76.0 billion for the year ended December 31, 2023, compared to $52.4 billion in 2022. Advisory assets were $735.8 billion, or 54.3% of total advisory and brokerage assets served, at December 31, 2023, up 26% from $583.1 billion at December 31, 2022.
Promotional (ongoing) for the year ended December 31, 2022 excludes $2.3 million of expenses incurred as a result of acquisitions, which are included in the Acquisition costs line item. Acquisitions, Integrations and Divestitures We continuously assess the competitive landscape in connection with our capital allocation framework as we pursue acquisitions, integrations and divestitures.
Promotional (ongoing) for the years ended December 31, 2023 and December 31, 2022 excludes $3.6 million and $2.3 million, respectively, of expenses incurred as a result of acquisitions, which are included in the acquisition costs line item.
The increase in sales-based commission revenue in 2022 compared to 2021 was primarily driven by increases in sales of annuities, partially offset by a decrease in sales of mutual funds.
The increase in sales-based commission revenue in 2023 compared to 2022 was primarily driven by an increase in sales of annuities and fixed income securities as a result of the higher interest rate environment, partially offset by a decrease in sales of mutual funds and equities.
We also support Independent RIAs through our Independent RIA advisory platform, which allows advisors to engage us for technology, clearing and custody services, as well as access the capabilities of our investment platforms. The assets held under an Independent RIA’s investment advisory accounts custodied with LPL Financial are included in total advisory assets and net new advisory assets.
We also support independent RIA firms that conduct their business through our Independent RIA advisory platform, which allows advisors to engage us for technology, clearing and custody services, as well as access the capabilities of our investment platforms.
Service and fee revenue for the year ended December 31, 2022 increased by $55.6 million compared to 2021, primarily from increases in 45 Table of Content s conference fees, increases in IRA custodian fees driven by growth in accounts, and increases in business services and planning and advice services fees due to growth in subscriptions.
Service and fee revenue for the year ended December 31, 2023 increased by $41.1 million compared to 2022, primarily due to increases in IRA 47 Table of Contents custodian fees, business services and planning and advice services fees, and fees relating to confirmations and error and omission insurance.
Failure to meet the respective minimum capital requirements can result in certain mandatory and discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts on PTC’s operations.
Failure to meet the respective minimum capital requirements can result in certain mandatory and discretionary actions by regulators that, if undertaken, could have substantial monetary and non-monetary impacts on PTC’s operations. Supplemental Guarantor Financial Information The Company filed a registration statement on Form S-3 to register, among other things, non-convertible debt securities that may be offered by LPL Holdings, Inc.
In addition, our revolving credit facility requires us to be in compliance with certain financial covenants as of the last day of each fiscal quarter. The financial covenants require the calculation of Credit Agreement EBITDA, as defined in, and calculated by management in accordance with, the Credit Agreement.
The financial covenants require the calculation of Credit Agreement EBITDA, as defined in, and calculated by management in accordance with, the Credit Agreement.
The below table summarizes the primary components of acquisition costs for the periods presented (in millions): Years Ended December 31, Acquisition costs 2022 2021 Compensation and benefits $ 20.6 $ 36.4 Professional services 12.0 18.7 Promotional (16) 2.3 14.3 Other 1.3 7.0 Acquisition costs $ 36.2 $ 76.4 (16) Promotional (ongoing) for the year ended December 31, 2022 includes $16.1 million of support costs related to full-time employees that are classified within Compensation and benefits expense in the consolidated statements of income.
(17) Promotional (ongoing) for the years ended December 31, 2023 and December 31, 2022 includes $30.7 million and $16.1 million, respectively, of support costs related to full-time employees that are classified within compensation and benefits expense in the consolidated statements of income.
Interest expense on borrowings for the year ended December 31, 2022 increased by $21.8 million compared to 2021, primarily due to increases in interest rates associated with our Term Loan B. See Note 11 - Corporate Debt and Other Borrowings, Net , within the notes to the consolidated financial statements for further detail.
Interest expense on borrowings for the year ended December 31, 2023 increased by $60.6 million compared to 2022, primarily due to increases in interest rates associated with our Term Loan B and revolving credit facilities and higher outstanding debt balances.
Corporate Cash, a component of cash and equivalents, is the sum of cash and equivalents from the following: (1) cash and equivalents held at the Parent, (2) cash and equivalents held at regulated subsidiaries as defined by the Credit Agreement, which include LPL Financial and PTC, in excess of the capital requirements of the Credit Agreement (which, in the case of LPL Financial, is net capital in excess of 10% of its aggregate debits, or five times the net capital required in accordance with Exchange Act Rule 15c3-1) and (3) cash and equivalents held at non-regulated subsidiaries.
Corporate Cash is the sum of cash and equivalents from the following: (1) cash and equivalents held at the Parent, (2) cash and equivalents held at regulated subsidiaries as defined by the Credit Agreement, which include LPL Financial and PTC, in excess of the capital requirements of the Credit Agreement (which, in the case of LPL Financial, is net capital in excess of 10% of its aggregate debits, or five times the net capital required in accordance with Exchange Act Rule 15c3-1) and (3) cash and equivalents held at non-regulated subsidiaries. 50 Table of Contents The following table presents the components of Corporate Cash (in thousands): December 31, 2023 December 31, 2022 Cash and equivalents $ 465,671 $ 847,519 Cash at regulated subsidiaries (410,313) (392,571) Excess cash at regulated subsidiaries per the Credit Agreement 128,327 4,439 Corporate Cash $ 183,685 $ 459,387 Corporate Cash Cash at the Parent $ 26,587 $ 448,180 Excess cash at regulated subsidiaries per the Credit Agreement 128,327 4,439 Cash at non-regulated subsidiaries 28,771 6,768 Corporate Cash $ 183,685 $ 459,387 Corporate Cash is monitored as part of our liquidity risk management.
Net new brokerage assets were an inflow of $43.5 billion for the year ended December 31, 2022, compared to $66.6 billion in 2021. Brokerage assets were $527.7 billion at December 31, 2022, down 6% from $563.2 billion at December 31, 2021.
Net new brokerage assets were $28.1 billion for the year ended December 31, 2023, compared to $43.5 billion in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table summarizes the impact of increasing interest rates on our interest expense from the variable portion of our debt outstanding, calculated using the projected average outstanding balance over the subsequent twelve-month period (in thousands): Outstanding Balance at December 31, 2022 Annual Impact of an Interest Rate ( † ) Increase of 10 Basis 25 Basis 50 Basis 100 Basis Corporate Debt and Other Borrowings Points Points Points Points Term Loan B $ 1,037,900 $ 1,031 $ 2,578 $ 5,156 $ 10,312 ____________________ (†) Our interest rate for our Term Loan B is locked in for one, two, three, six or twelve months as allowed under the Credit Agreement.
Biggest changeWhile our senior secured term loan is subject to increases in interest rates, we do not believe that a short-term change in interest rates would have a material impact on our net income given revenue generated by our client cash balances, which is generally subject to the same, but off-setting, interest rate risk. 59 Table of Contents The following table summarizes the impact of increasing interest rates on our interest expense from the variable portion of our debt outstanding, calculated using the projected average outstanding balance over the subsequent twelve-month period (in thousands): Outstanding Balance at December 31, 2023 Annual Impact of an Interest Rate ( † ) Increase of 10 Basis 25 Basis 50 Basis 100 Basis Corporate Debt and Other Borrowings Points Points Points Points Term Loan B $ 1,027,200 $ 1,023 $ 2,558 $ 5,116 $ 10,232 Revolving Credit Facility 280,000 280 700 1,400 2,800 Variable-Rate Debt Outstanding $ 1,307,200 $ 1,303 $ 3,258 $ 6,516 $ 13,032 ____________________ (†) Our interest rate for our Term Loan B is locked in for one, two, three, six or twelve months as allowed under the Credit Agreement.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk We maintain trading securities owned and securities sold, but not yet purchased in order to facilitate client transactions, to meet a portion of our clearing deposit requirements at various clearing organizations, to track the performance of our research models and in connection with our dividend reinvestment program.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market Risk We maintain trading securities and securities sold, but not yet purchased in order to facilitate client transactions, to meet a portion of our clearing deposit requirements at various clearing organizations, to track the performance of our research models and in connection with our dividend reinvestment program.
Changes in the value of our market risk sensitive instruments may result from fluctuations in interest rates, credit ratings of the issuer, equity prices or a combination of these factors. In facilitating client transactions, our securities owned and securities sold, but not yet purchased generally involve mutual funds, including dividend reinvestments.
Changes in the value of our market risk sensitive instruments may result from fluctuations in interest rates, credit ratings of the issuer, equity prices or a combination of these factors. In facilitating client transactions, our trading securities and securities sold, but not yet purchased generally involve mutual funds, including dividend reinvestments.
We enter into market risk sensitive instruments for purposes other than trading, which are included in other assets on the consolidated statements of financial condition and can include deferred compensation plan assets invested in life insurance, money market and other mutual funds, investments in fractional shares held by customers, and other non-traded real estate investment trusts and auction rate notes.
We enter into market risk sensitive instruments for purposes other than trading, which are included in other assets on the consolidated statements of financial condition and can include deferred compensation plan assets invested in life insurance, money market and other mutual funds, investments in fractional shares held by customers, and other non-traded real estate investment trusts.
At the end of the selected periods the rates will be locked in at the then current rate. The effect of these interest rate locks are not included in the table above. 55 Table of Content s See Note 11 - Corporate Debt and Other Borrowings, Net, within the notes to the consolidated financial statements for additional information.
At the end of the selected periods the rates will be locked in at the then-current rate. The effect of these interest rate locks are not included in the table above. See Note 11 - Corporate Debt and Other Borrowings, Net, within the notes to the consolidated financial statements for additional information.
We seek to limit this risk through review of the underlying business and the use of limits established by senior management taking into consideration factors including current market conditions, the financial strength of the counterparty, the size of the position or commitment, the expected duration of the position or commitment and other positions or commitments outstanding. 56 Table of Content s
We seek to limit this risk through review of the underlying business and the use of limits established by senior management taking into consideration factors including current market conditions, the financial strength of the counterparty, the size of the position or commitment, the expected duration of the position or commitment and other positions or commitments outstanding. 61 Table of Contents
Clients earn interest on deposits in the ICA and the DCA while we earn a fee. The fees we earn from cash held in the ICA are based primarily on prevailing interest rates in the current interest rate environment.
Clients earn interest on deposits in the ICA and the DCA while we earn a fee. The fees we earn from cash held in the ICA are based primarily on prevailing interest rates in the current interest rate environment, and are therefore subject to interest rate risk.
As of December 31, 2022, $1.0 billion of our outstanding debt was subject to floating interest rate risk.
As of December 31, 2023, $1.3 billion of our outstanding debt was subject to floating interest rate risk.
As of December 31, 2022, the fair value of our trading securities was $36.8 million, and securities sold, but not yet purchased were not material. The fair value of market risk sensitive instruments entered into for other than trading purposes included within other assets was $617.5 million as of December 31, 2022.
As of December 31, 2023, the fair value of our trading securities was $76.1 million, and securities sold, but not yet purchased were not material. The fair value of market risk sensitive instruments entered into for other than trading purposes included within other assets was $858.6 million as of December 31, 2023.
Our losses on margin accounts were immaterial during the years ended December 31, 2022 and 2021. We monitor exposure to industry sectors and individual securities and perform analyses on a regular basis in connection with our margin lending activities. We adjust our margin requirements if we believe our risk exposure is not appropriate based on market conditions.
Our losses on margin accounts were not material during the years ended December 31, 2023 and 2022. We monitor exposure to industry sectors and individual securities and perform analyses on a regular basis in connection with our margin lending activities.
We are subject to concentration risk if we extend large loans to or have large commitments with a single counterparty, borrower or group of similar counterparties or borrowers, or if we accept a concentrated position as collateral for a margin loan.
We adjust our margin requirements if we believe our risk exposure is not appropriate based on market conditions. 60 Table of Contents We are subject to concentration risk if we extend large loans to or have large commitments with a single counterparty, borrower or group of similar counterparties or borrowers, or if we accept a concentrated position as collateral for a margin loan.
Removed
While our senior secured term loan is subject to increases in interest rates, we do not believe that a short-term change in interest rates would have a material impact on our net income given revenue generated by our client cash balances, which is generally subject to the same, but off-setting, interest rate risk.

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