Business Model: It is important to understand that LPL Financial does not engage in the business practices of banks or investment banks. We do not provide loans to hedge funds or other speculators. We do not create proprietary product of any kind, including leveraged closed-end funds. We do not hold any securities on our books that are open to market risk. Because we do not engage in those practices, our business withstands shocks to the markets very well. LPL is a technology and service partner to advisors and financial institutions as opposed to a traditional wirehouse business model.

Capital: The firm maintains net capital well in excess of the required capital of our regulator, which is FINRA. It is multiples higher than that which is required.

LPL Financial Liquidity Position: LPL Financial has two operating lines of credit, which provide substantial liquidity to the firm. This is in addition to cash assets that we hold on the balance sheet. Therefore, the total liquidity of the firm far exceeds any measure of what has been needed in the past or is anticipated in the future.

Investment Inventory: Unlike other types of brokerage firms, LPL Financial does not maintain an inventory of investments. This means that our liquidity as a firm is not impacted by the rise and fall of the values of securities on our books, as we have none.

Monitoring Our Partners: Our Enterprise Risk Management department routinely examines the groups with which LPL Financial does business to limit exposure to risk. This team monitors all outstanding debits and credits and the firms that clear those trades to ensure they are healthy and do not pose a risk to LPL Financial or our clients. In addition, as you are aware, we are very conservative when it comes to our approach to margining of securities. This practice helps us to avoid risks by taking only the most liquid securities and margining them at the most conservative limits.