Broker-dealer LPL Financial Holdings terminated its CEO, Dan Arnold, on Tuesday, effective immediately, after an external investigation found he violated the company’s code of conduct with statements he made to employees, according to a filing with the Securities and Exchange Commission.
The company did not detail what, specifically, Arnold said, but emphasized, in a release, that the statements violated “LPL’s commitment to a respectful workplace.”
Arnold is ineligible for severance, and LPL forfeited the former CEO’s outstanding equity awards, save for a portion of vested options it set aside if Arnold successfully settles with the company.
La Jolla, California-based LPL named its chief growth officer, Rich Steinmeier, as its interim CEO. Steinmeier joined LPL in 2018 from UBS and, before that, spent several years at Merrill Lynch, according to his LinkedIn profile.
“The Board has every confidence in Rich and LPL’s seasoned management team to ensure a smooth and stable transition,” LPL’s chair, James Putnam, said in a statement.
The change at the top marks the latest challenge for LPL, which acknowledged in August that it’s facing a class-action lawsuit over its cash sweep policy. The company pledged to defend itself “vigorously.”
Under Arnold, LPL’s brokerage and advisory assets nearly tripled – to $1.5 trillion as of June 30, compared with $509 billion just before he took the CEO role in 2017, according to Bloomberg. The company’s stock price also jumped sixfold in that time, the wire service reported, adding that Arnold oversaw a more than 60% increase in the number of advisers at the firm.
Yet Arnold’s departure could be seen as somewhat of a surprise. The now-former CEO once told CEO Magazine he “became a real believer that culture eats strategy for breakfast” and said his mission, with regard to LPL’s financial advisers, was about “taking care of you, so you can take care of your clients.”
Putnam, in a release Tuesday, said the company’s code of conduct “requires every employee, no matter their title, to foster a supportive and professional workplace and show respect to each other, our stakeholders and the broader community.”
“Mr. Arnold failed to meet these obligations,” Putnam said.
The sudden leadership change may generate questions from LPL’s investors, analysts at Citizens JMP Securities said Wednesday in a note to clients.
“Our impression is that he was generally well liked internally and led the business through a period of success,” the analysts wrote.
Perhaps one signal of a souring situation came during LPL’s July quarterly earnings call, when Arnold said some partner firms were “strategically misaligned” with LPL’s mission because “they were limiting advisers’ ability to choose how and where they do business.”
“That posture is in stark contrast to our core principles of adviser independence,” Arnold said, according to Bloomberg. “And as a result, we have resolved to separate from these relationships.”
The investment advisory firm Merit Financial Group cut its ties with LPL days later, Citywire reported.
Arnold’s departure marks just the latest instance of workplace culture dissonance this year. Moelis banker Jonathan Kaye left that company shortly after he was filmed punching a woman in the face amid a Pride celebration in Brooklyn. He faces six charges.
Edward Ruff, a managing director at Citi, left the bank this spring after it investigated allegations that he intimidated one co-worker and shouted insults at members of his team, reportedly because they were late to a call.
And BMO fired four Toronto-based mining bankers in January after the bank investigated allegations that a young male colleague was subjected to homophobic slurs and targeted in person and over Microsoft Teams.
Court records in California’s San Diego County, where Arnold lives, indicate no history of criminal or civil proceedings against him, Bloomberg reported. Likewise, the Financial Industry Regulatory Authority’s BrokerCheck platform shows no complaints against Arnold.
Arnold’s restricted and performance stock awards, as of February, were worth roughly $28 million, according to LPL’s annual proxy statement, which indicated he had the chance to earn more than $50 million in stock.
Arnold received almost $17 million in compensation awards last year, and LPL’s board in March heralded the CEO’s progress toward achieving the company’s “strategic vision and cultural evolution.”
Arnold came to LPL in 2007, when the company acquired UVEST Financial Services. Arnold had been that firm’s president and chief operating officer. He moved up to CFO of LPL in 2012 and became the company’s president in 2015 and CEO two years later, according to LinkedIn.
He did not respond to requests for comment from Bloomberg.
