What changed in this filing

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Item 1A. Risk Factors

2025-02-20 compared with 2024-02-21 · 108 added, 95 removed, 441 unchanged (32% of the section changed)

13 unchanged sentences

• 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.

• Our risk management policies and procedures may not be effective in fully mitigating our risk exposure in all environments or against all types of risks.

• We face competition in attracting and retaining key talent.

3 unchanged sentences

• 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.

• Our insurance coverage may be expensive, and losses we incur may exceed the limits of our insurance coverage, or may not be covered at all.

• 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.

57 unchanged sentences

Our revenue from our client cash programs has declined in the past as a result of a low interest rate environment, and our revenue may decline in the future due to decreases in interest rates, decreases in client cash balances or mix shifts among the current or future deposit sweep vehicles, client cash account or money market accounts that we offer.

Though the Federal Reserve increased its target federal funds rate in 2022 to combat rising inflation, there is no guarantee of further increases, or that the higher interest rate environment will be sustained.

If the Federal Reserve reduces its target federal funds rate from current levels, our revenue will be impacted.

Such a decline has occurred, and could occur in the future.

The Federal Reserve steadily increased its target federal funds rate in 2022 and 2023 to combat rising inflation, and while we have experienced a sustained higher interest rate environment, the target federal funds rate was reduced in the second half of 2024, with further reductions anticipated.

If the Federal Reserve continues to reduce its target federal funds rate from current levels, our revenue will be impacted.

Our revenue from our client cash programs also depends on our success in placing deposits and negotiating favorable terms in agreements with third-party banks and money market fund providers participating in our programs, as well as our success in offering competitive products, program fees and interest rates payable to clients.

15 unchanged sentences

Our business is subject to risks related to litigation, arbitration claims and regulatory actions.

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, governmental subpoenas and regulatory, governmental and self-regulatory organization (“SRO”) inquiries, investigations and enforcement proceedings, as well as other actions and claims.

As is common in our industry, we have been subjected to and are currently subject to legal and regulatory proceedings arising out of our business operations, including lawsuits, arbitration claims, governmental subpoenas and regulatory, governmental and self-regulatory organization (“SRO”) inquiries, investigations and enforcement proceedings, as well as other actions and claims.

Many of our legal claims are initiated by clients of our advisors and involve the purchase or sale of investment securities, but other claims and proceedings may be, and have been, initiated by state-level and federal regulatory authorities and SROs, including the SEC, FINRA and state securities regulators, as well as clients of Independent RIAs.

73 unchanged sentences

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.

For instance, an acquisition could have a negative effect on our financial and strategic position and reputation, the synergies expected to result from a business combination could fail to materialize, 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.

Moreover, we may not be able to successfully integrate acquired businesses into ours, and therefore we may not be able to realize the intended benefits from an acquisition.

We may have a

lack of experience in new markets, products or technologies brought on by the acquisition, and we may have an initial dependence on unfamiliar supply or distribution partners.

Moreover, we may not be able to successfully integrate acquired businesses

into ours, and therefore we may not be able to realize the intended benefits from an acquisition.

For example, we may have a lack of experience in new markets, products or technologies brought on by the acquisition, we may have an initial dependence on unfamiliar supply or distribution partners, or the resources necessary to integrate an acquired business may exceed our expectations or the resources we have available.

An acquisition may create an impairment of relationships with customers or suppliers of the acquired business or our advisors or suppliers.

All of these and other potential risks may serve as a diversion of our management’s attention or other resources from other business concerns, and any of these factors could have a material adverse effect on our business.

All of these and other potential risks could disrupt our existing business, as well as the businesses we seek to acquire, and could serve as a diversion of our management’s attention or other resources from other business concerns, and any of these factors could have a material adverse effect on our business.

For more information about risks relating to updating our technology in connection with our business development opportunities, see “We rely on technology in our business, and technology and execution failures could subject us to losses, litigation and regulatory actions” below.

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 have adopted policies and procedures to identify, monitor and manage our risk.

These policies and procedures, however, may not be effective and may not be adapted quickly enough to respond effectively to changed circumstances.

Some of our compliance and risk evaluation functions depend upon information technology systems, information provided by others and public information regarding markets, clients or other matters that are otherwise accessible by us.

Our risk management policies and procedures may not be effective in fully mitigating our risk exposure in all environments or against all types of risks.

We have adopted policies, procedures and an overarching policy management framework to identify, monitor and manage our risks.

These policies and procedures, however, may not be fully effective nor be adapted quickly enough to effectively respond to changing circumstances in our evolving business and regulatory environment.

Various Company risk and compliance functions rely on information technology systems, information provided by third parties and publicly available information about markets, clients or other matters relevant to our business and operations.

In some cases, however, that information may not be available, accurate, complete or up-to-date.

Also, because many of our advisors work in decentralized offices, additional risk management challenges exist, including with regard to advisor office technology, vendors and information security practices.

Also, because many of our advisors work in decentralized or branch offices, additional risk management challenges exist, including advisor office technology, vendors and third party-providers, supervision and oversight, business continuity, information security practices, and training and awareness.

In addition, our existing systems, policies and procedures, and staffing levels may be insufficient to support a significant increase in our advisor population.

Any such increase could require us to increase our costs, including information technology costs, in order to maintain our compliance and risk management obligations, or strain our existing policies and procedures as we evolve to support a larger advisor population.

If our systems, policies and procedures are not effective, or if we are not successful in capturing risks to which we are or may be exposed, we may suffer harm to our reputation or be subject to litigation or regulatory actions that could have a material adverse effect on our business and financial condition.

Any such increase could require us to increase our costs, in order to maintain our risk management and compliance obligations, or strain our existing policies and procedures as we evolve to support a larger advisor population.

If our systems, policies and procedures are not effective, or if we are not successful in identifying, monitoring, and managing the risks to which we are or may be exposed, we may suffer harm to our reputation or be subject to litigation or regulatory actions that could have a material adverse effect on our business and financial condition.

We face competition in attracting and retaining key talent.

11 unchanged sentences

Our indebtedness could adversely affect our financial condition and may limit our ability to use debt to fund future capital needs.

At December 31, 2023, we had total indebtedness of $3.7 billion , of which $1.3 billion i s subject to floating interest rates.

At December 31, 2024, we had total indebtedness of $5.5 billion, of which $2.1 billion is subject to floating interest rates.

Our level of indebtedness could increase our vulnerability to general adverse economic and industry conditions.

It could also require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes.

other general corporate purposes.

In addition, our level of indebtedness may limit our flexibility in planning for changes in our business and the industry in which we operate and limit our ability to borrow additional funds.

5 unchanged sentences

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.

Our Credit Agreement and the Indentures governing our Notes permit us to incur additional indebtedness.

Our Credit Agreement and the Indentures governing our senior unsecured notes (the “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.

3 unchanged sentences

A credit rating downgrade would not impact the terms of our repayment obligations under the Credit Agreement or the Indentures.

However, a credit rating downgrade to a below investment grade rating could cause currently suspended restrictive covenants and guarantees under certain of our Indentures to automatically be reinstated.

However, our credit rating does impact the interest rate of our revolving credit facility and Term Loan A.

Further, a credit rating downgrade to a below investment grade rating could cause currently suspended restrictive covenants and guarantees under certain of our Indentures to automatically be reinstated.

Any such downgrade would negatively impact our ability to obtain comparable rates and terms on any future refinancing of our debt and could restrict our ability to incur additional indebtedness.

19 unchanged sentences

Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us.

If our indebtedness is in default for any reason, our business could be materially and adversely affected.

If our indebtedness is in default for any

reason, our business could be materially and adversely affected.

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.

1 unchanged sentence

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.

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.

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 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.

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.

Our insurance coverage may be expensive, and losses we incur may exceed the limits of our insurance coverage, or may not be covered at all.

We are subject to claims in the ordinary course of business.

27 unchanged sentences

To help our advisors meet their clients’ needs with suitable investment options, we have relationships with many of the industry-leading providers of financial and insurance products.

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 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.

If we lose our relationships with one or more of these manufacturers, our ability to serve our advisors and, in turn, their clients, and our business, may be materially adversely affected.

19 unchanged sentences

• subject to oversight by the DOL relative to its servicing of retirement plan accounts subject to ERISA and the Code.

The primary SRO of LPL Financial’s broker-dealer activity is FINRA, and the primary regulator of LPL Financial’s investment advisory activity is the SEC.

LPL Financial is also subject to state laws, including state “blue sky” laws, and the rules of the Municipal Securities Rulemaking Board for its municipal securities activities.

In addition, another subsidiary, LPL Enterprise, is an introducing broker-dealer to LPL Financial.

LPL Enterprise was created as part of our new business model that supports insurance companies and asset managers ability to provide financial services and expand their respective service capabilities.

LPL Enterprise is:

• registered as an introducing broker-dealer with the SEC, each of the 50 states, the District of Columbia, Puerto Rico and the U.S.

Virgin Islands;

• registered as an investment adviser with the SEC;

• a member of FINRA;

• subject to oversight by the DOL relative to its servicing of retirement plan accounts subject to ERISA and the Code.

The primary SRO of LPL Financial’s and LPL Enterprise’s broker-dealer activity is FINRA, and the primary regulator of LPL Financial’s and LPL Enterprise’s investment advisory activity is the SEC.

LPL Financial and LPL Enterprise are also subject to state laws, including state “blue sky” laws, and the rules of the Municipal Securities Rulemaking Board for its municipal securities activities.

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.

adopt new or revised laws, regulations or interpretations.

There can be no assurance that other federal or state agencies will not attempt to further regulate our business or that specific interactions with foreign countries or foreign nationals will not trigger regulation in non-U.S.

7 unchanged sentences

As of the date of this Annual Report on Form 10-K, we have a number of pending regulatory matters.

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.

Under the SEC’s proposed resolution, we would pay a $50.0 million civil monetary penalty.

As a result of the foregoing, we have recorded $40.0 million in other expense on the consolidated statements of income for the year ended December 31, 2023, to reflect the amount of the penalty that is not covered by our captive insurance subsidiary.

We have not yet reached a settlement in principle with the SEC, and any settlement agreement remains subject to negotiation of the civil monetary penalty and definitive documentation.

For example, in August 2024, the Company received a request for information from the SEC regarding certain elements of the Company’s cash management program for corporate advisory accounts, which based on the nature of the request, we believe is part of an industry-wide inquiry.

The Company has been cooperating with the request.

For more information, see Note 14 - Commitments and Contingencies within the notes to the consolidated financial statements in this Annual Report on Form 10-K.

2 unchanged sentences

We have established a captive insurance subsidiary that underwrites insurance for various regulatory and legal risks, although self-insurance coverage is not available for all matters, and may not be sufficient to protect us from losses we may incur.

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.

For more information about the potential limits of our insurance coverage, including our self-insurance coverage, see “ Our insurance coverage may be expensive, and losses we incur may exceed the limits of our coverage, or may not be covered at all ” above.

Regulatory developments could adversely affect our business by increasing our costs or making our business less profitable.

Our profitability could be affected by rules and regulations that impact the business and financial communities generally and, in particular, our advisors and their clients, including changes to the interpretation or enforcement of laws governing standards of care applicable to investment advice and recommendations, taxation, the classification of our independent advisors as independent contractors rather than our employees, trading, electronic commerce, privacy, data protection and anti-money laundering.

Our profitability could be affected by rules and regulations that impact the business and financial communities generally and, in particular, our advisors and their clients, including changes to the interpretation or enforcement of laws governing standards of care applicable to investment advice and recommendations, taxation, the classification of our independent advisors as independent contractors rather than our employees, trading, electronic communication, privacy, data protection and anti-money laundering.

Failure to comply with these rules and regulations could subject us to regulatory actions or litigation and it could have a material adverse effect on our business, results of operations, cash flows or financial condition.

New laws, rules and regulations, or changes to the interpretation or enforcement of existing laws, rules or regulations, could also result in limitations on the lines of business we conduct or plan to conduct, modifications to our current or future business practices, compressed margins, increased capital requirements and additional costs.

The regulatory environment, including a significant number of rule proposals from the SEC, continues to evolve, and will likely increase the complexity of operating our business.

For example, regulators have introduced and adopted rules that subject broker-dealers and investment advisers to a higher standard of care.

This includes the SEC’s Reg BI, fiduciary duty rules in Massachusetts and Nevada, and state best interest standards applicable to broker-dealers or the sale of certain annuity and insurance products.

In addition, the DOL proposed a “Retirement Security Rule” that would broaden the definition of fiduciary advice and modify the prohibited transaction exemptions that enable firms to receive various types of compensation.

The regulatory environment continues to evolve, with the potential to increase the complexity of operating our business.

This includes overlapping state and federal rules and guidance that impose requirements on varying segments of our business, such as interpretations regarding standards of care.

For example, the North American Securities Administrators Association (“NASAA”) has proposed a model conduct rule for broker-dealers for state securities regulators to review and propose for adoption as a statute.

To the extent any state adopts such a rule and in the event the rule differs from the federal standard, we would be subject to various standards of care throughout multiple jurisdictions.

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 changes may also affect the array of products and services we offer to clients and the compensation that we and our advisors receive in connection with such products and services.

These changes may also affect the array of

products and services we offer to clients and the compensation that we and our advisors receive in connection with such products and services.

It is unclear how and whether other regulators, including the SEC, FINRA, DOL, banking regulators and other state securities and insurance regulators may respond to, or enforce elements of, these new regulations, or develop their own similar laws and regulations.

4 unchanged sentences

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.

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.

Moreover, to the extent the Dodd-Frank Act, or other existing or new laws and 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.

9 unchanged sentences

The business activities that we may conduct are limited by various regulatory agencies.

Our membership agreement with FINRA may be amended by application to include additional business activities.

Our membership agreement with FINRA may be amended by application to include additional business activities, as it was in 2024.

This application process is time-consuming and may not be successful.

9 unchanged sentences

The Net Capital Rule specifies minimum capital requirements that are intended to ensure the general soundness and liquidity of broker-dealers.

Because our holding companies are not registered broker-dealers, they are not subject to the Net Capital Rule.

Because our holding companies are not registered broker-

dealers, they are not subject to the Net Capital Rule.

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.

4 unchanged sentences

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.

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 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.

17 unchanged sentences

These efforts involve a significant investment of financial and personnel resources and we cannot guarantee that these upgrades or the investments that support them will be completed successfully, on time or at all, or that they will not result in interruptions to the availability of our technology systems or business operations.

More generally, our failure to upgrade our systems successfully could have a material adverse effect on our business, financial condition and results of operations, as well as our ability to achieve our growth objectives.

More generally, our failure to upgrade our systems successfully could have a material adverse effect on our business, financial condition and results of operations, as well as our

ability to achieve our growth objectives.

For more information about risks related to upgrading our technology platform, see “Failure to maintain technological capabilities, flaws in existing technology, difficulties in upgrading our technology platform or the introduction of a competitive platform could have material adverse effect on our business” below.

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.

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.

To the extent third parties, such as product sponsors, also retain similarity sensitive information about our advisors or their clients, their systems may face similar vulnerabilities.

We are not able to protect against these events completely given the rapid evolution of new vulnerabilities, the complex and distributed nature of our systems, our interdependence on the systems of other companies and the increased sophistication of potential attack vectors and methods against our systems.

In particular, advisors work in a wide variety of environments, and although we require our advisors to maintain certain

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.

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.

Although we take protective measures and endeavor to strengthen the security and resiliency of these systems, our computer systems, software and networks are vulnerable to information breaches, 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 (collectively, “Security Events”).

To the extent third parties, such as product sponsors, also retain similarly sensitive information about our advisors, their clients or our employees, their systems may face similar vulnerabilities that could result in Security Events for us.

We are not able to protect against these Security Events completely given the rapid evolution of new vulnerabilities, the complex and distributed nature of our systems, our interdependence on the systems of other companies and the increased sophistication of potential attack vectors and methods against our systems.

In particular, advisors work in a wide variety of environments, and although we require our advisors to maintain certain 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.

If one or more of these Security 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.

As a result, we could be subject to litigation, client loss, reputational harm, regulatory sanctions and financial losses that are either not insured or are not fully covered through any insurance we maintain.

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.

We currently and may in the future use, develop, and incorporate within our technology platform and services, systems and tools that incorporate artificial intelligence (“AI”) and machine learning, including generative AI.

As with many innovations, AI and machine learning present risks and challenges that could adversely impact our business.

The development, adoption and application of generative AI technologies are still in their early stages, and ineffective or inadequate AI development or deployment practices by third-party developers or vendors could result in unintended consequences.

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 other confidential information, or otherwise mismanages or misappropriates that data or information, we could also be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.

We currently, and may in the future, use, develop, and incorporate systems and tools that leverage artificial intelligence and other machine learning and large language models, including generative artificial intelligence (collectively, “AI”), within our technology platform and services.

AI presents risks and challenges that could adversely impact our business.

The development, adoption, and application of AI technologies are still in their early stages, and ineffective or inadequate AI governance, development or deployment practices by us or by third-party developers or vendors could result in unintended consequences.

For example, AI algorithms that we use may be flawed or may be based on datasets that are biased or insufficient.

In addition, any latency, disruption or failure in our AI and machine learning systems or infrastructure could result in delays or errors in our products and services.

In addition, any latency, disruption, or failure in our AI and related systems or infrastructure could result in delays or errors in our products and services.

Developing, testing, and deploying resource-intensive AI systems may require additional investment and increase our costs.

There also may be real or perceived social harm, unfairness or other outcomes that undermine public confidence in the use and deployment of AI and machine learning.

There also may be real or perceived social harm, unfairness, or other outcomes that undermine public confidence in the use and deployment of AI.

Any of the foregoing may result in harm to our business, results of operations, or reputation.

The legal and regulatory landscape surrounding AI and machine learning technologies is rapidly evolving and remains uncertain, including in the areas of intellectual property, cybersecurity, privacy and data protection.

For example, there is uncertainty around the validity and enforceability of intellectual property rights related to use, development and deployment of AI and machine learning.

Compliance with new or changing laws, regulations or industry standards relating to AI may impose significant operational costs and may limit our ability to develop, deploy or use AI and machine learning technologies.

The legal and regulatory landscape surrounding AI is rapidly evolving and remains uncertain, including in the areas of intellectual property, cybersecurity, privacy and data protection.

For example, there is uncertainty around the validity and enforceability of intellectual property rights related to use, development and deployment of AI.

Compliance with new or changing laws, regulations or industry standards relating to AI may impose significant operational costs and may limit our ability to use, develop, or deploy AI.

Failure to appropriately respond to this evolving landscape may result in legal liability, regulatory action or brand and reputational harm.

Our information technology systems may be vulnerable to security risks.

The secure transmission of confidential information, including personally identifiable information, over public networks is a critical element of our operations.

The secure and reliable transmission of confidential information, including financial account information and personally identifiable information, over public networks is a critical element of our operations.

As part of our normal operations, we maintain and transmit confidential information about clients of our advisors, our advisors and our employees, as well as proprietary information relating to our business operations.

The risks related to transmitting data and using service providers outside of and storing or processing data within our network are increasing based on escalating and malicious cyber activity, including activity that originates outside of the United States from criminal elements and hostile nation-states.

The risks related to transmitting data and using service providers outside of and storing or processing data within our network are increasing based on escalating and complex malicious cyber activity, including activity that originates outside of the United States from criminal elements and hostile nation-states.

Cybersecurity requires ongoing investment and diligence against evolving threats and is subject to federal and state regulation relating to the protection of confidential information.

We may be required to expend significant additional resources to modify our protective measures, to investigate and remediate vulnerabilities or other exposures, to make required notifications, or to update our technologies, websites and web-based applications to comply with industry and regulatory standards, but we may not have adequate personnel, financial or other resources to fully meet these threats and evolving standards.

We may be required to expend significant additional resources to modify our protective measures, to investigate and remediate vulnerabilities or other exposures, to make required notifications, to restore our systems and fully recover from a Security Event, or to update our technologies, websites and web-based applications to comply with industry and regulatory standards, but we may not have adequate personnel, financial or other resources to fully meet these threats and evolving standards.

We will also be required to effectively and efficiently govern, manage and ensure timely enhancements to our systems, including in their design, architecture and interconnections as well as their organizational and technical protections.

The SEC has proposed new cybersecurity regulations for investment advisers, and other new regulations may be promulgated by relevant federal and state authorities at any time.

The SEC has adopted new cybersecurity regulations for broker-dealers and investment advisers, and other new regulations may be promulgated by relevant federal and state authorities at any time.

In addition, compliance with regulatory expectations may become increasingly complex as more state regulatory authorities issue or amend regulations, which sometimes conflict, governing handling of confidential information by companies within their jurisdiction.

3 unchanged sentences

If our application service provider systems are disrupted or fail for any reason, or if our systems or facilities are infiltrated or damaged by unauthorized persons or malicious computer code, we or our advisors could experience data loss, operational disruptions, financial loss, harm to reputation, regulatory violations, class action and commercial litigation and significant business interruption or loss.

In addition, vulnerabilities of our external service providers or within our software supply chain could pose security risks to client information.

In addition, vulnerabilities of our external service providers or within our software supply chain could pose security risks to the confidential information of advisors and their clients.

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.

Further, any actual or perceived breach or cybersecurity attack directed at other financial institutions or financial services companies, whether or not we are targeted, could lead to a general loss of customer confidence in the use of technology to conduct financial transactions, which could negatively impact us, including the market perception of the effectiveness of our security measures and technology infrastructure.

Further, any actual or perceived data breach or cybersecurity attack directed at other financial institutions or financial services companies, whether or not we are targeted, could lead to a general loss of customer confidence in the use of technology to conduct financial transactions, which could negatively impact us, including the market perception of the effectiveness of our security measures and technology infrastructure.

The occurrence of any of these events may have a material adverse effect on our business or results of operations.

Even though we monitor and seek to improve the security of our information technology systems, they remain vulnerable to security risks, and there can be no guarantee that they will not be subject to unauthorized access.

We rely on our advisors and employees to comply with our policies and procedures to safeguard confidential data, but disloyal or negligent insiders pose risks.

We rely on our advisors and employees to comply with our policies and procedures and to implement controls to safeguard confidential data, but we remain exposed to the risk of malicious or negligent acts by insiders.

The failure of our advisors and employees to comply with such policies and procedures, either intentionally or unintentionally, could result in the loss or wrongful use of their clients’ confidential information or other sensitive information, as well as result in aspects of our technology systems malfunctioning, being disabled or failing to work as designed.

In addition, even if we and our advisors comply with our policies and procedures, persons who circumvent security measures or bypass authentication controls could infiltrate or damage our systems or facilities and wrongfully use our confidential information or clients’ confidential information or cause interruptions or malfunctions in our operations.

Cyber-attacks can be designed to collect information, manipulate, destroy or corrupt data, applications, or accounts and to disable the functioning or use of applications or technology assets.

Cyber-attacks can be designed to collect information, manipulate, destroy or corrupt data, applications, accounts, or to disable the functioning or use of applications or technology assets.

Such activity could, among other things:

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• allow competitors or hackers access to our proprietary business information;

• disrupt the normal operations of our services and technology;

• subject us to liability for a failure to safeguard client data;

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• require significant capital and operating expenditures to investigate and remediate a breach.

As malicious cyber activity escalates, including activity that originates outside of the United States, the risks we face relating to transmission of data and our use of service providers outside of our network, as well as the storing or processing of data within our network, intensify.

While we maintain cyber liability insurance, this insurance does not cover certain types of potential losses and, for covered losses, may not be sufficient in amount to protect us against all such losses.

As malicious cyber activity becomes more complex and escalates, including activity that originates outside of the United States, the risks we face relating to transmission of data and our use of service providers outside of our network, as well as the storing or processing of data within our network, intensify.

While we maintain cyber liability

insurance, this insurance does not cover certain types of potential losses and, for covered losses, may not be sufficient in amount to protect us against all such losses.

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.

We cannot be certain that our systems and networks will not be subject to successful attacks, despite the measures we have taken and may take in the future to address and mitigate cybersecurity, privacy and technology risks.

Additionally, in the course of operations, we share sensitive proprietary information and personal data with vendors, third parties and other financial institutions.

Additionally, in the course of operations, we rely upon the technology systems of, and share sensitive proprietary information and personal data with, vendors, third parties and other financial institutions.

We also rely upon software and data feeds from various third parties.

Although we have a third party management program and conduct due diligence before sharing sensitive data with third-party vendors, this due diligence may not uncover administrative, technical or electronic gaps or flaws in their processes or systems.

In the past we have experienced limited breaches of information security with our vendors, which have led to notification costs and reputational harm with regulators, current and potential advisors, and advisors’ clients, and we may experience similar or more significant events in the future.

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.

In light of the diversity of our advisors’ security environments and the increasing sophistication of malicious actors, an attack could occur and persist for an extended period of time without detection.

We expect that any investigation of a cyber-attack could take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information.

In some cases, the nature of the attack may be such that full and reliable information may never be available.

During such time we would not necessarily know the extent of the harm or how best to remediate it, and certain errors or actions could be repeated or compounded before they are discovered and remediated, all of which would further increase the costs and consequences of such an attack.

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.

Although we have a third party risk management program and conduct due diligence regarding cybersecurity and data protection practices before integrating our systems or sharing sensitive data with third-party vendors, this due diligence may not uncover administrative, technical or electronic gaps or flaws in their processes or systems.

In the past, we and third parties on whose systems we rely have experienced Security Events that have resulted in the temporary interruption of our operations, breach notification costs and reputational harm with regulators, current and potential advisors, and advisors’ clients, and we may experience similar or more significant events in the future.

Future Security Events involving individual and regulatory notifications could lead to litigation involving other financial institutions, class actions, regulatory investigations or other harm.

Security Events within the financial services industry are increasing, and threat actors continue to find novel ways to attack technology platforms and services.

In light of the diversity of our advisors’ security environments and the increasing sophistication of malicious actors, a Security Event could occur and persist for an extended period of time without detection.

We expect that any investigation of a Security Event could take substantial amounts of time, and that there may be extensive delays before we obtain full and reliable information and otherwise resume normal operations.

In some cases, circumstances of a Security Event may be such that complete and reliable information about its cause, scope and nature may not be available as we attempt to respond to it.

These Security Events 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.

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.

Many aspects of our business are subject to comprehensive legal requirements concerning the collection, use and sharing of personal information, including client and employee information.

Many aspects of our business are subject to comprehensive legal requirements concerning the collection, use and sharing of personal information, including advisor, client and employee information.

This includes rules adopted pursuant to the Gramm-Leach-Bliley Act and an ever-increasing number of state laws and regulations, such as the California Consumer Privacy Act, as amended by the California Privacy Rights Act.

Similar laws are in force in Colorado, Connecticut, Utah, and Virginia, and other such laws will go into force over the next few years.

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.

Similar laws are in force in several other states, and other such laws will go into force over the next few years.

We continue our efforts to safeguard the personal information 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.

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.

The evolving patchwork of differing state and federal privacy and data security laws increases the cost and complexity of operating our business and our exposure to regulatory investigations, enforcement, fines, and penalties, any of which could negatively impact our business and operations.

Failure to comply with these obligations could 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.

Failure to comply with these obligations could result in damage to our reputation and 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.

Depending on the nature of the violation, we may be required to offer restitution or remediation to customers, and the costs of doing so could exceed our loss reserves.

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Maintaining competitive technology requires us to make significant capital investments, both in the near term and longer-term.

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.

The process of upgrading and expanding our systems has at times caused, and may in the future cause, us to suffer system degradations, outages and failures.

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• legislation or regulatory policies, practices or actions, including developments related to the “best interest” and “fiduciary” standards of care;

• political developments;

• political developments, including elections and appointments;

• general economic conditions.

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

These broad market and industry factors may materially harm the market price of our common stock irrespective of our operating performance.

In addition, in the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against the affected company.

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We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our debt service and other obligations.

We have no direct operations and derive all of our cash flow from our subsidiaries.

LPL Financial Holdings Inc.

has no direct operations and derives all of its cash flow from its direct and indirect subsidiaries.

Because we conduct our operations through our subsidiaries, we depend on those entities for dividends and other payments or distributions to meet any existing or future debt service and other obligations.

The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us.

The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to LPL Financial Holdings Inc..

In addition, FINRA regulations restrict dividends in excess of 10% of a member firm’s excess net capital without FINRA’s prior approval.

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The declaration and payment of any future quarterly cash dividend or any additional repurchase authorizations will be subject to the Board’s continuing determination that the declaration of future dividends or repurchase of our shares are in the best interests of our stockholders and are in compliance with our Credit Agreement, the Indentures and applicable law.

Such determinations will depend upon a number of factors that the Board deems relevant, including future earnings, the success of our business activities, capital requirements, alternative uses of capital, general economic, financial and business conditions, and the future prospects of our own business.

Such determinations will depend upon a number of factors that the Board deems relevant, including future earnings,

the success of our business activities, capital requirements, alternative uses of capital, general economic, financial and business conditions, and the future prospects of our business.

The future payment of dividends or repurchases of shares will also depend on our ability to generate earnings and cash flows.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors