LPL Financial Holdings Inc.

Corporate governance · Internal controls and risk management

There are risks inherent in the independent broker-dealer business model. Compared to wirehouses and other employee model broker-dealers, we generally offer advisors wider choice in operating their businesses. Our approach may make it more challenging for us to comply with our supervisory and regulatory compliance obligations, particularly in light of our limited on-site supervision and the complexity of certain advisor business models.

Stakeholder relations · Investor relations and market confidence

If such downgrade were to occur, or if ratings agencies indicated that a downgrade may occur, perceptions of our financial strength could be damaged, which could affect our client relationships and decrease the number of investors, clients and counterparties that do business with us.

Reputation and brand · Brand damage and negative publicity

Negative perceptions or publicity regarding these matters could damage our reputation among existing and potential advisors and employees, and could lead advisors to terminate their agreements with us, which they generally have the right to do unilaterally upon short notice. Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us.

Market and investment · Market volatility and economic cycles

Significant downturns and volatility in equity and other financial markets have had and could continue to have an adverse effect on our financial condition and results of operations. General economic and market factors can affect our commission and fee revenue. For example, a decrease in market levels or market volatility can reduce new investments by advisors' new and existing clients in financial products that are linked to the equity markets, such as variable life insurance, variable annuities, mutual funds and managed accounts.

Credit and liquidity · Access to capital and financing

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. We may also need access to capital in connection with the growth of our business, through acquisitions or otherwise. In the event current resources are insufficient to satisfy our needs, we may need to rely on financing sources such as bank debt.

Capital structure and performance · Financial performance volatility

The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for our investors. The market price of our common stock may fluctuate substantially due to the following factors: 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.

Credit and liquidity · Debt service and covenant compliance

Restrictions under our Credit Agreement may prevent us from taking actions that we believe would be in the best interest of our business. Our Credit Agreement contains customary restrictions on our activities, including covenants that may restrict us from: creating liens; selling assets; engaging in certain transactions with affiliates; and consolidating, merging or transferring all or substantially all of our assets.

Capital structure and performance · Dividend policy and capital allocation

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. 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.

Digital transformation and innovation · Technology implementation and upgrades

We continually update our technology platform with the goal of improving its reliability, resiliency, security and functionality, including in connection with regulatory requirements, acquisitions and strategic relationships. While we seek to implement these updates with no or limited interruption to our operations or the availability of our systems, we may not be successful and resulting interruptions could be widespread, lengthy, or both.

Cybersecurity and data protection · Insider threats and access controls

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.

Cybersecurity and data protection · Third party data security and vendors

These third-party service providers are also susceptible to operational and technology vulnerabilities, including cyber-attacks, security breaches, ransomware, fraud, phishing attacks and computer viruses, which could result in unauthorized access, misuse, loss or destruction of data, an interruption in service or other similar events that may impact our business.

Digital transformation and innovation · Technology obsolescence and evolution

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. We believe that our future success will depend in part on our ability to anticipate and adapt to technological advancements required to meet the changing demands of our advisors and their clients.

Legal and litigation · Litigation and legal proceedings

Our business is subject to risks related to litigation, arbitration claims and regulatory actions. 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 inquiries, investigations and enforcement proceedings.

Industry regulation · Capital and liquidity requirements

The SEC, FINRA, CFTC, OCC and NFA have extensive rules and regulations with respect to capital requirements. Our registered broker-dealer subsidiaries, including LPL Financial, are subject to the Uniform Net Capital Rule under the Exchange Act, and related requirements of SROs. The CFTC and NFA also impose net capital requirements.

Data and privacy · Data protection and privacy laws

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 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.

Strategic execution · Merger acquisition and divestiture risks

Our business could be materially adversely affected as a result of the risks associated with acquisitions, investments, and strategic relationships. We have made acquisitions and investments and entered into strategic relationships in the past and plan to pursue further acquisitions, investments and strategic relationships in the future. These transactions are accompanied by risks. 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.

Customer and revenue · Customer retention and subscription renewal

If we fail to continue to attract highly qualified advisors, or if advisors licensed with us leave us to pursue other opportunities, we could face a significant decline in market share, commission and fee revenue or net income. We could face similar consequences if current or potential clients of ours, including current clients that use our outsourced customized clearing, advisory platforms or technology solutions, decide to use one of our competitors rather than us.

Supply chain and procurement · Supplier operation and dependance

We rely on third-party service providers, including off-shore providers, to perform technology, processing and support functions. 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. Any significant failures by BETAHost or our other service providers could cause us to sustain serious operational disruptions and incur losses and could harm our reputation.

Core operations · Operational disruption and business continuity

In addition, certain aspects of our operations are dependent on third-party financial institutions that we do not control, such as clearing agents, securities exchanges, clearing houses and other financial intermediaries. Any failure of these intermediaries, or any interruption in their operations, either on a widespread or individual basis, could adversely affect our ability to execute transactions, service our clients and manage our exposure to risk.

Social and demographic · Public perception and reputation

Any damage to our reputation could harm our business and lead to a loss of revenue and net income. We have spent many years developing our reputation for integrity and client service. Damage to our reputation could cause significant harm to our business and prospects and may arise from numerous sources, including: litigation or regulatory actions; failing to deliver acceptable standards of service and quality, including technology or cybersecurity failures; compliance failures; and unethical behavior and the misconduct of employees, advisors or counterparties.