| June 7
June 7 LPL Financial Holdings Inc has
hired the global chief risk officer from Morgan Stanley's
wealth division at a time when it comes under increased scrutiny
over its ability to supervise more than 13,000 independent
The hiring of Michelle Oroschakoff, 52, came as LPL
Financial, the No. 4 U.S. brokerage firm, wades through a number
of regulatory complaints about sales abuses and lack of adequate
oversight for its fast-growing network of advisers across the
Oroschakoff, a Morgan Stanley veteran who has held various
senior legal and compliance jobs at the company, will supervise
regulatory compliance, data security and privacy at the firm,
among other risk management functions. She replaces LPL
Financial's current Chief Risk Officer John McDermott, who is
set to retire next month. The appointment was announced on
LPL Financial was ordered last month to pay a total of $9
million for significant email system failures and making
misstatements to the Financial Industry Regulatory Authority
(FINRA), Wall Street's watchdog.
Days later, the U.S. Securities and Exchange Commission
filed civil fraud charges against a former LPL Financial
adviser, charging he diverted some $2 million of client funds to
use for personal expenses.
LPL Financial also signed an agreement with Massachusetts'
top securities regulator this year to repay more than $5 million
to investors for improper sales of non-traded real estate
"She's an excellent candidate for that job," said Gerald
Baker, a Michigan-based compliance consultant who has known
Oroschakoff for more than ten years. "She has a very excellent
background in legal and compliance, regulatory and risk
LPL Financial's move to bring in a chief risk officer from
the outside is not surprising, especially after the actions by
FINRA and the SEC, Baker said. "It reflects on how serious the
firm takes these issues and wants to address them."
"It doesn't mean the resources they have are inadequate. It
just wants to improve and install better controls to avoid
similar problems in the future."
Oroschakoff, based in San Diego, will report directly to
LPL's Chief Executive Mark Casady.
Morgan Stanley spokeswoman Christy Jockle confirmed
Oroschakoff's departure and said her replacement will be
announced in the near future.
BEEFING UP COMPLIANCE
LPL Financial, based in San Diego and Boston, has about 400
compliance staffers, but will grow well beyond that before year
end, President Robert Moore said in an interview in conjunction
with the Reuters Global Wealth Management Summit.
Moore said LPL Financial is beginning to centralize
compliance in its regional and home offices and spending heavily
to hire compliance staff and improve its systems.
"Mistakes happen and we're not going to be exempted from
that, but the attitude around the way we identify, ultimately
mitigate and address them are very fundamental to our future and
ability to credibly lead," Moore said. "It comes at a cost that
we have to find a way to absorb."
Oroschakoff is the firm's latest senior risk management
hire. It named James Shorris, a former head of enforcement at
FINRA, to head regulatory and compliance policy in September
Oroschakoff has also served as general counsel for Fisher
Investments, an independent registered investment advisory firm
based in Woodside, California. Prior to joining Morgan Stanley,
she was associate general counsel and head of the firm's San
Francisco litigation department.
"The biggest challenge she has is dealing with the great
deal of diversity in terms of the types of advisers LPL has on
the platform," said Ken Hoffman, managing director and president
of Optima Group, a consultantcy on strategic planning for
executive management at LPL Financial.
LPL services single independent advisers in a traditional
broker-dealer model, pure registered independent advisers and
so-called "hybrid" advisers who both manage money for a fee and