LPL Financial Holdings
LPL Financial Holdings Inc. (Form: DEF 14A, Received: 03/27/2015 16:06:15)

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION 
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of 
the Securities Exchange Act of 1934 (Amendment No.          )
 
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LPL Financial Holdings Inc.
 
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2015 PROXY STATEMENT
 
 
Notice of Annual Meeting of Stockholders to be held on May 11, 2015

 
 
 



















 







Member FINRA/SIPC.



75 State Street, Boston, MA 02109-1827 

March 27, 2015

Dear Fellow Stockholders:
It is my pleasure to invite you to attend the 2015 Annual Meeting of Stockholders of LPL Financial Holdings Inc. The meeting will be held on Monday , May 11, 2015 , at 3:00 p.m. , local time, at our offices located at 75 State Street, Boston, Massachusetts 02109. Holders of record of our common stock as of March 19, 2015 are entitled to notice of and to vote at the 2015 Annual Meeting.
The Notice of Annual Meeting of Stockholders and the proxy statement that follow describe the business to be conducted at the meeting.
We are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the Internet. We believe this approach will allow us to provide you with the information you need while expediting your receipt of these materials, lowering our costs of delivery, and reducing the environmental impact of our annual meeting. If you would like us to send you printed copies of our proxy statement and accompanying materials, we will be happy to do so at no charge upon your request. For more information, please refer to the Notice of Internet Availability of Proxy Materials that we mailed to you on or about March 27, 2015 .
YOUR VOTE IS VERY IMPORTANT. PLEASE SUBMIT YOUR PROXY OR VOTING INSTRUCTIONS AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
You are welcome to attend the annual meeting. However, even if you plan to attend, please vote your shares promptly to ensure they are represented at the meeting. You may submit your proxy by Internet or telephone, as described in the following materials, or if you request printed copies of these materials, by completing and signing the proxy card and returning it in the envelope provided. If you decide to attend the meeting and wish to change your proxy, you may do so automatically by voting in person at the meeting.
We ask you to RSVP if you intend to attend the annual meeting. Please refer to page 1 of the accompanying proxy statement for further information concerning attendance at the annual meeting.
On behalf of the Board of Directors, I thank you for your continued support of LPL Financial Holdings Inc.
 
 
Sincerely,
 
 
 
 
Mark S. Casady 
Chair and CEO




75 State Street, Boston, MA 02109-1827 
Notice of Annual Meeting of Stockholders
 
 
Time and Date
3:00 p.m., local time, on Monday, May 11, 2015
 
 
Location
LPL Financial Holdings Inc.
75 State Street
Boston, Massachusetts 02109
 
 
Items of Business
(1)    Elect eight directors to the Board of Directors of LPL Financial Holdings Inc.;
(2)    Approve the amendment and restatement of the LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan;
(3)    Approve the amendment and restatement of the LPL Financial Holdings Inc. Corporate Executive Bonus Plan;
(4)    Ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2015;
(5)    Hold an advisory vote on executive compensation; and
(6)    Consider and act upon any other business properly coming before the 2015 annual meeting of stockholders (the "Annual Meeting") and at any adjournment or postponement thereof.
 
 
Record Date
Stockholders of record as of 5:00 p.m. Eastern Time on March 19, 2015 (the ''Record Date'') will be entitled to vote at the Annual Meeting and any postponements or adjournments thereof.
Information relating to the matters to be considered and voted on at the Annual Meeting is set forth in the proxy statement accompanying this Notice.               
Cameras and electronic recording devices are not permitted at the Annual Meeting.        
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE SUBMIT YOUR PROXY BY FOLLOWING THE INSTRUCTIONS SET FORTH IN THE FOLLOWING MATERIALS. YOU MAY VOTE YOUR SHARES AND SUBMIT A PROXY BY USING THE INTERNET OR TELEPHONE AS DESCRIBED HEREIN OR, IF YOU REQUESTED PRINTED COPIES OF THESE MATERIALS, BY SIGNING AND RETURNING A PROXY CARD.
 
 
By Order of the Board of Directors,
 
 
 
 
Gregory M. Woods
Secretary
Boston, Massachusetts 
March 27, 2015
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 11, 2015 :
THIS PROXY STATEMENT AND LPL FINANCIAL HOLDINGS INC.'S 2014 ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT WWW.LPL.COM. ADDITIONALLY, IN ACCORDANCE WITH SEC RULES, YOU MAY ACCESS THESE MATERIALS ON THE WEBSITE INDICATED IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS, WHICH YOU HAVE RECEIVED FROM COMPUTERSHARE SHAREOWNER SERVICES.




Proxy Statement Summary

This summary highlights information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.

2015 Annual Meeting of Stockholders
 
 
Time and Date
3:00 p.m., local time, on Monday, May 11, 2015
 
 
Location
LPL Financial Holdings Inc.
75 State Street
Boston, Massachusetts 02109
 
 
Record Date
5:00 p.m. Eastern Time on March 19, 2015
 
 
Voting
Shareholders as of the Record Date are entitled to one vote per share on each matter to be voted upon at the Annual Meeting.
 
 
Entry
Everyone attending the Annual Meeting will be required to present both proof of ownership of the Company's common stock and valid picture identification, such as a driver's license or passport. If your shares are held in the name of a bank, broker, or other holder of record, you will need a recent brokerage account statement or letter from your bank, broker, or other holder reflecting stock ownership as of the Record Date. If you do not have both proof of ownership of the Company's common stock and valid picture identification, you may not be admitted to the Annual Meeting.
 
 


Voting Proposals
Proposal
Board Recommendation
Page Reference
Proposal 1: Election of Directors
FOR all nominees
Proposal 2: Approval of the Amendment and Restatement of the LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan
FOR
Proposal 3: Approval of the Amendment and Restatement of the LPL Financial Holdings Inc. Corporate Executive Bonus Plan
FOR
Proposal 4: Ratification of the Appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as Our Independent Registered Public Accounting Firm
FOR
Proposal 5: Advisory Vote on Executive Compensation
FOR


Table of Contents




Table of Contents
 
 



General Information


LPL FINANCIAL HOLDINGS INC.
Proxy Statement
2015 Annual Meeting of Stockholders
General Information

Introduction
This proxy statement and the accompanying Notice of Annual Meeting of Stockholders are being furnished to the holders of common stock, $0.001 par value (the "Common Stock"), of LPL Financial Holdings Inc., a Delaware corporation (the "Company"), in connection with the solicitation of proxies on behalf of the board of directors of the Company (the "Board" or the "Board of Directors") for use at the 2015 annual meeting of stockholders (the "Annual Meeting") and any adjournment or postponement thereof. The Annual Meeting will be held on Monday , May 11, 2015 , at the offices of LPL Financial, 75 State Street, Boston, Massachusetts 02109 at 3:00 p.m. , local time.
 
 
 
 
Stockholders who wish to attend the Annual Meeting in person must follow the instructions under the section below entitled "Attending the Annual Meeting."
 
 
 
 
The Board has made this proxy statement and the Company's 2014 annual report on Form 10-K (the "Annual Report") available to you on the Internet or, upon your request, has delivered printed versions of these materials to you by mail, in connection with the Board's solicitation of proxies for use at the Annual Meeting. As a stockholder of the Company as of 5:00 p.m. Eastern Time on March 19, 2015 (the "Record Date"), you are invited to attend the Annual Meeting and are entitled to and requested to vote on the items of business described in this proxy statement.
Record Date, Shares Outstanding, and Quorum
On the Record Date, there were 96,687,851 outstanding shares of Common Stock. Only stockholders of record as of the Record Date will be entitled to vote at the Annual Meeting. A list of stockholders of record entitled to vote will be available at the meeting. In addition, you may contact our corporate secretary, at our address as set forth above, to make arrangements to review a copy of the stockholder list at our offices, for any purpose germane to the meeting, between the hours of 9:00 a.m. and 5:00 p.m., local time, on any business
 
day from May 1, 2015 up to the time of the Annual Meeting.
The presence in person or by proxy of a majority of shares of Common Stock outstanding and entitled to vote at the Annual Meeting will constitute a quorum at the Annual Meeting. Both abstentions and broker non-votes will be counted as present in determining the presence of a quorum. A "broker non-vote" is a proxy from a broker or other nominee indicating that such person has not received instructions from the beneficial owner on a particular matter with respect to which the broker or other nominee does not have discretionary voting power. Brokers have the discretion to vote their clients' proxies only on routine matters. At our Annual Meeting, only the ratification of our auditors is a routine matter. Each share of Common Stock is entitled to one vote.
Notice of Electronic Availability of Proxy Statement and Annual Report
As permitted by the Securities and Exchange Commission (the "SEC"), we are making this proxy statement and our Annual Report available to our stockholders electronically via the Internet. On or about March 27, 2015 , a Notice of Internet Availability of Proxy Materials (the "Notice") was mailed to stockholders of record as of the Record Date. We are furnishing our proxy materials to our stockholders on the Internet in lieu of mailing a printed copy of our proxy materials to each record holder of Common Stock. You will not receive a printed copy of our proxy materials unless you request one. The Notice instructs you as to how you may access and review on the Internet all of the important information contained in these proxy materials or request a printed copy of those materials. The Notice also instructs you as to how you may vote your proxy.
Attending the Annual Meeting
We invite all stockholders to attend the Annual Meeting. If you are a record holder of our Common Stock, which means that your shares are represented by ledger entries in your own name directly registered with our transfer agent, Computershare Shareowner Services, you must bring valid picture identification with you to the Annual Meeting to allow us to verify your ownership. If your Common Stock is held in "street name," which means that the shares are held for your benefit in the name of a broker, bank, or


1 | 2015 Proxy Statement

General Information


other intermediary, you must bring a brokerage account statement or letter from your broker, bank, or other intermediary reflecting stock ownership in order to be admitted to the Annual Meeting. Please note that if you hold your Common Stock in street name, you may not vote your shares in person unless you obtain a legal proxy from your broker, giving you the right to vote the shares at the Annual Meeting.
If you do not have both proof of ownership of Common Stock and valid picture identification, you may not be admitted to the Annual Meeting.
 
 
 
 
 
If you plan to attend the Annual Meeting, please be sure to RSVP via email to lplfinancialannualmeeting@lpl.com. Please include your name and phone number in your response. A confirmation, including driving directions and additional meeting information, will be emailed to registered participants.
 
 
 
 

 
 
 
 
 
Items of Business to be Voted upon at Annual Meeting
 
 
n
To elect all of the nominees to the Board of Directors consisting of the eight nominees named in this proxy statement for a one-year term
 
 
n
To approve the amendment and restatement of the LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan ;
 
 
n
To approve the amendment and restatement of the LPL Financial Holdings Inc. Corporate Executive Bonus Plan ;
 
 
n
To ratify the appointment of Deloitte & Touche LLP by the Audit Committee of the Board of Directors as our independent registered public accounting firm for the fiscal year ending December 31, 2015;
 
 
n
To hold an advisory vote on executive compensation; and
 
 
n
To consider and act upon any other business properly coming before the Annual Meeting and at any adjournment or postponement thereof.
 
 
 
 
 
Manner of Voting
If you are a record holder of our Common Stock, you may vote in one of the following ways:
:
By Internet:   by following the Internet voting instructions included in the proxy card at any time up until 11:59 p.m., Eastern Time, on May 10, 2015 .
+
By Mail:    by marking, dating, and signing your printed proxy card (if received by mail) in accordance with the instructions on it and returning it by mail in the pre-addressed reply envelope provided with the proxy materials for receipt prior to the Annual Meeting.
 
(
By Telephone:    by following the telephone voting instructions included in the proxy card at any time up until 11:59 p.m., Eastern Time, on May 10, 2015 .
I
In Person:   by voting your shares in person at the Annual Meeting (if you satisfy the admission requirements, as described above). Even if you plan to attend the Annual Meeting, we encourage you to vote in advance by Internet, telephone, or mail so that your vote will be counted in the event you later decide not to attend the Annual Meeting.


2015 Proxy Statement | 2

General Information


 
 
 
 
If your shares are held in street name through a broker, bank, or other intermediary, your broker, bank, or other intermediary should give you instructions for voting your shares. In these cases, you may vote by Internet, telephone, or mail, as instructed by your broker, bank, or other intermediary. You may also vote in person if you obtain a legal proxy from your broker, giving you the right to vote the shares at the Annual Meeting.
 
 
 
 
Shares of Common Stock represented by properly executed proxy cards received by the Company in time for the meeting will be voted in accordance with the instructions specified in the proxies. If you submit a proxy but do not indicate any voting instructions, your shares will be voted " FOR " the election as directors of the nominees named in this proxy statement; " FOR " the approval of the amendment and
 
restatement of the Company’s 2010 Omnibus Equity Incentive Plan ; " FOR " the approval of the amendment and restatement of the Company’s Corporate Executive Bonus Plan ; " FOR " the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm; and " FOR " the proposal regarding an advisory vote on executive compensation.
Our management and Board of Directors know of no other matters to be brought before the Annual Meeting. If other matters are properly presented to the stockholders for action at the Annual Meeting or any adjournments or postponements thereof, it is the intention of the proxy holders named in the proxy card to vote in their discretion on all matters on which the shares of Common Stock represented by such proxy are entitled to vote.

Voting Requirements
 
 
 
 
 
 
Proposal One—Election of Directors
 
 
Our bylaws provide that a nominee for director will be elected if the number of votes properly cast “for” such nominee’s election exceeds the number of votes properly cast “against” such nominee’s election; however, if the number of persons properly nominated for election to the Board of Directors exceeds the number of directors to be elected, the directors will be elected by the plurality of the votes properly cast. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the election of directors.
 
 
 
 
 
 
 
 
 
 
 
 
Proposal Two—Approval of the Amendment and Restatement of the LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan
 
 
The proposal to approve the amendment and restatement of the LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
 
 
 
 
 
 
 
 
 
 
 
 
Proposal Three—Approval of the Amendment and Restatement of the LPL Financial Holdings Inc. Corporate Executive Bonus Plan
 
 
The proposal to approve the amendment and restatement of the LPL Financial Holdings Inc. Corporate Executive Bonus Plan  will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
 
 
 
 
 
 
 
 
 
 
 
 
Proposal Four—Ratification of Appointment of Deloitte & Touche LLP
 
 
The proposal to ratify the appointment of Deloitte & Touche LLP will be determined by a majority of the votes cast on the matter affirmatively or negatively in person or by proxy at the Annual Meeting. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
 
 
 
 
 
 

3 | 2015 Proxy Statement

General Information


 
 
 
 
 
 
Proposal Five—Advisory Vote on Executive Compensation
 
 
Because the proposal to approve, on an advisory basis, the compensation awarded to named executive officers for the fiscal year ended December 31, 2014 is a non-binding, advisory vote, there is no required vote that would constitute approval. The vote is advisory and non-binding in nature but our Compensation and Human Resources Committee (the "Compensation Committee") will take into account the outcome of the vote when considering future executive compensation arrangements. A vote to abstain or a broker non-vote will have no direct effect on the outcome of the proposal.
 
 
 
 
 
 
Revocation of Proxies
If you submit a proxy, you are entitled to revoke your proxy at any time before it is exercised in one of the following ways: by attending the Annual Meeting and voting in person, by submitting a duly executed proxy bearing a later date, or by sending written notice of revocation to our corporate secretary at LPL Financial Holdings Inc., 75 State Street, Boston, Massachusetts 02109. A stockholder of record who voted by the Internet or by telephone may also change his or her vote with a timely and valid later Internet or telephone vote, as the case may be. Any stockholder of record as of the Record Date attending the Annual Meeting may vote in person whether or not a proxy has previously been given, but the presence (without further action) of a stockholder at the Annual Meeting will not constitute revocation of a previously given proxy. If you hold your shares in street name and would like to change your voting instructions, please follow the instructions provided to you by your broker, bank, or other intermediary.
Solicitation of Proxies
The Board of Directors of LPL Financial Holdings Inc. is soliciting proxies. We have not hired a proxy solicitation firm to assist in the solicitation of proxies. Stockholders who elect to vote over the Internet or telephone may incur costs such as telecommunication and Internet access charges for which the stockholder is solely responsible. The
 
telephone and Internet voting facilities for stockholders of record will close at 11:59 p.m. Eastern Time on May 10, 2015 . The Company will otherwise pay the expenses of solicitation of proxies.
Householding
Only one copy of the Notice is being delivered to multiple stockholders sharing an address, unless we have received contrary instructions from one or more of the stockholders. We will undertake to deliver promptly, upon written or oral request, a separate copy of the Notice to a stockholder at a shared address to which a single copy of the Notice was delivered. You may make a written or oral request by sending a written notification to our corporate secretary at LPL Financial Holdings Inc., 75 State Street, Boston, Massachusetts 02109, or by calling our offices at (617) 423-3644, extension 0, and providing your name, your shared address, and the address to which we should direct the additional copy of the Notice. Multiple stockholders sharing an address who have received one copy of the Notice and would prefer us to mail each stockholder a separate copy of future mailings should contact us at our principal executive offices. Additionally, if current stockholders with a shared address received multiple copies of the Notice and would prefer us to mail one copy of future mailings to stockholders at the shared address, notification of that request may also be made through our principal executive offices.


2015 Proxy Statement | 4

Proposal 1: Election of Directors


Proposal 1: Election of Directors
Our Board of Directors currently consists of seven independent directors and our chief executive officer. As recommended by the nominating and governance committee of the Board (the "Nominating and Governance Committee"), our Board of Directors has nominated each of the current directors standing for election, all to hold office until the annual meeting of stockholders in 2016 and until their respective successors shall have been elected.
As described in detail below, our nominees have considerable professional and business expertise. The recommendation of our Board of Directors is based on its carefully considered judgment that the experience, qualifications, attributes, and skills of our nominees qualify them to serve on our Board of Directors.
If any of our nominees is unable or unwilling to serve on our Board of Directors, the shares represented by your proxy will be voted for the election of such other person as may be nominated by our Board of Directors. In addition, in full compliance with all applicable state and federal laws and regulations, we will file an amended proxy statement and proxy card that, as applicable, (1) identifies the alternate nominee(s), (2) discloses that such nominees have consented to being named in the revised proxy statement and to serve if elected, and (3) includes the disclosure required by Item 7 of Schedule 14A with respect to such nominees. We know of no reason why any nominee would be unable or unwilling to serve. All nominees have consented to be named in this proxy statement and to serve if elected.
Director Qualifications and Experience
We seek a Board that, as a whole, possesses the experiences, skills, backgrounds, and qualifications appropriate to function effectively in light of the Company's current and evolving business circumstances. The Company seeks directors with established records of significant accomplishment in business and areas relevant to our strategies. We seek individuals with integrity, independence of thought and judgment, energy, forthrightness,
 
analytical skills, and a commitment to the Company and the interests of all stockholders. We believe that all of our director nominees possess these characteristics.
Although we do not have a formal policy regarding diversity, our goal is a balanced and diverse Board, with members whose skills, background and experience are complementary and, together, cover the spectrum of areas that impact our business. The Board believes that the current composition of the Board reflects a group of highly talented individuals with diverse skills, backgrounds, and professional and industry experience.
Policy with Respect to the Consideration of Director Candidates Recommended or Nominated by Stockholders
The Nominating and Governance Committee will consider director candidates recommended by stockholders in accordance with our bylaws. For a stockholder to make any nomination for election to the Board of Directors at an annual meeting, the stockholder must provide notice and certain information about the recommending stockholder and the nominee to the Company, which notice must be delivered to, or mailed and received at, the Company's principal executive offices:
(i)
no later than the close of business on the 90 th calendar day nor earlier than the close of business on the 120 th calendar day, prior to the anniversary date of the prior year's annual meeting; or
(ii)
if there was no annual meeting in the prior year or if the date of the current year's annual meeting is more than 30 days before or after the anniversary date of the prior year's annual meeting, on or before 10 days after the day on which the date of the current year's annual meeting is first disclosed in a public announcement.
Submissions must be in writing and addressed to the Nominating and Governance Committee, care of the Company's corporate secretary. Electronic submissions will not be considered.


5 | 2015 Proxy Statement

Proposal 1: Election of Directors


Board of Director Nominees
The name, age, and a description of the business experience, principal occupation, and past employment and directorships of each of the nominees during the last five years are set forth below. In addition, we have summarized the particular experience, qualifications, attributes, and skills that led the Board of Directors, including our Nominating and Governance Committee, to determine that each nominee should serve as a director.
 
 
 
 
 
Richard W. Boyce, Director Since 2009
 
 
Mr. Boyce, 60, retired in 2013 from the partnership at TPG, a leading global private investment firm founded in 1992 with over $67 billion of assets under management as of December 31, 2014. He founded and led TPG's operating group, which drives performance improvement across all TPG companies. In his first role with TPG, he served as chief executive officer of J. Crew Group, Inc., from 1997 to 1999, and as a board member from 1997 to 2006. He became chair of Burger King Corporation in 2002 and served on that board through 2010. Prior to joining TPG, Mr. Boyce was employed by PepsiCo, Inc. from 1992 to 1997, most recently as senior vice president of operations for Pepsi-Cola North America and was previously a partner at Bain & Company. He has previously served on the board of directors of several other TPG companies, including Del Monte Foods, ON Semiconductor, Gate Gourmet, and Direct General Corporation. He currently serves on the Wake Forest University School of Business Board of Visitors and the board of directors of Torrent Technologies, and is a member of the Board of Overseers of the Hoover Institution at Stanford. Mr. Boyce received a B.S.E. from Princeton University and received his M.B.A. from the Stanford Graduate School of Business.
Mr. Boyce's pertinent experience, qualifications, attributes, and skills include his:
 
 
n
high level of financial, operating, and management experience, gained through his roles as chief executive officer of J. Crew Group, Inc. and chair of the board of directors of Burger King Corporation;
 
 
n
high level of financial literacy gained through his investment experience as a partner at TPG; and
 
 
n
knowledge and experience gained through service on the boards of other public companies.
 
 
 
 
 
 
 
 
 
 
John J. Brennan, Director Since 2010
 
 
Mr. Brennan, 60, is chair emeritus and senior advisor of The Vanguard Group, Inc. ("Vanguard"), a global investment management company. Mr. Brennan joined Vanguard in July 1982. He was elected president in 1989 and served as chief executive officer from 1996 to 2008 and chair of the board from 1998 to 2009. Mr.   Brennan is the lead director of General Electric Company and a director of Guardian Life Insurance Company of America; lead governor of the Financial Industry Regulatory Authority, Inc. ("FINRA") board of governors; and a trustee of the University of Notre Dame. He also served as a trustee and past chair of the Financial Accounting Foundation and as a director of The Hanover Insurance Group from 2011 until 2013. He graduated from Dartmouth College and received his M.B.A. from the Harvard Business School. He has received honorary degrees from Curry College and Drexel University.
Mr. Brennan's pertinent experience, qualifications, attributes, and skills include his:
 
 
n
high level of financial literacy and operating and management experience, gained through his roles as chief executive officer and chair of the board of directors of Vanguard as well as through his service with the Financial Accounting Foundation; and
 
 
n
expertise in the financial industry, underscored by his current role as lead governor of the board of governors of FINRA.
 
 
 
 
 

2015 Proxy Statement | 6

Proposal 1: Election of Directors


 
 
 
 
 
Mark S. Casady, Chief Executive Officer, Director and Chair of the Board Since 2005
 
 
Mr. Casady, 54, is chair of the Board of Directors and our chief executive officer. He joined us in May 2002 as chief operating officer and also served as our president from April 2003 to December 2005. He became chair in December 2005 and chief executive officer in March 2006. Before joining our firm, Mr. Casady was managing director, mutual fund group for Deutsche Asset Management, Americas—formerly Scudder Investments ("Scudder"). He joined Scudder in 1994 and held roles as managing director, Americas; head of global mutual fund group; and head of defined contribution services. He was also a member of the Scudder, Stevens and Clark Board of Directors and Management Committee. He is a current board member of Eze Software Group and Citizens Financial Group and serves on the FINRA board of governors. Mr. Casady received his B.S. from Indiana University and his M.B.A. from DePaul University.
Mr. Casady's pertinent experience, qualifications, attributes, and skills include his:
 
 
n
unique perspective and insights into our operations as our current chair and chief executive officer, including knowledge of our business relationships, competitive and financial positioning, senior leadership, and strategic opportunities and challenges;
 
 
n
operating, business, and management experience as the chief executive officer of a public company; and
 
 
n
expertise in the financial industry, underscored by his experience as a current member of the board of governors of FINRA and a former member of the board of the Insured Retirement Institute.
 
 
 
 
 
 
 
 
 
 
H. Paulett Eberhart, Director Since 2014
 
 
Ms. Eberhart, 61, most recently served as president and chief executive officer of CDI Corp. ("CDI"), a provider of engineering and information technology outsourcing and professional staffing services, from 2011 to 2014, and served as an advisor to CDI until December 2014. From January 2009 until January 2011, Ms.   Eberhart was chair and chief executive officer of HMS Ventures, a privately held business involved with technology services and the acquisition and management of real estate. Prior to that she served as president and chief executive officer of Invensys Process Systems, Inc. ("Invensys"), a process automation company, from January 2007 to January 2009. Ms. Eberhart held multiple senior-level financial and operational roles during a 26-year career at Electronic Data Systems Corporation ("EDS"), an information technology and business processing outsourcing company, including as president of Americas of EDS from 2003 until March   2004 and senior vice president of EDS and president of Solutions Consulting from 2002 to 2003. Ms.   Eberhart currently serves as a director of Anadarko Petroleum Corporation and Cameron International Corporation. She is a Certified Public Accountant and received her B.S. from Bowling Green State University.
Ms. Eberhart’s pertinent experience, qualifications, attributes, and skills include her:
 
 
n
wealth of accounting and financial experience, as well as managerial experience, through her numerous years of service as an executive officer for EDS, Invensys, and CDI, as well as various other operating and financial positions during her 26 years at EDS;
 
 
n
strong knowledge of the intersection of technology, data, and finance industries; and
 
 
n
knowledge and experience gained through her service on the boards of other public companies .
 
 
 
 
 

7 | 2015 Proxy Statement

Proposal 1: Election of Directors


 
 
 
 
 
Anne M. Mulcahy, Director Since 2013
 
 
Ms. Mulcahy, 62, is chair of the board of trustees of Save The Children Federation, Inc., a non-profit organization dedicated to creating lasting change in the lives of children throughout the world, a position she has held since March 2010. She previously served as chair of the board of Xerox Corp. ("Xerox"), a document management company, from January 2002 to May 2010, and chief executive officer of Xerox from August   2001 to July 2009. She is a director of Graham Holdings Company, Target Corp., and Johnson &   Johnson. From 2004 to 2009, Ms. Mulcahy also served as a director of Citigroup Inc.
Ms. Mulcahy's pertinent experience, qualifications, attributes, and skills include her:
 
 
n
extensive experience in all areas of business management as she led Xerox through a transformational turnaround; and
 
 
n
leadership roles in business trade associations and public policy activities, which provide the Board of Directors with additional expertise in the areas of organizational effectiveness, financial management, and corporate governance.
 
 
 
 
 
 
 
 
 
 
James S. Putnam, Director Since 2005
 
 
Mr. Putnam, 60, has been chief executive officer of Global Portfolio Advisors ("GPA"), a global brokerage clearing services provider, since September 2004. Mr. Putnam has served on the board of directors of GPA since 1998, and has been vice chair since December 2005. Prior to his tenure with GPA, Mr. Putnam was employed by LPL Financial beginning in 1983 where he held several positions, culminating in managing director of national sales, responsible for branch development, attraction, retention, and management of LPL   Financial advisors. He was also responsible for marketing and all product sales. Mr. Putnam began his securities career as a retail representative with Dean Witter Reynolds in 1979. Mr. Putnam received a B.A. in Law Enforcement Administration from Western Illinois University.
Mr. Putnam's pertinent experience, qualifications, attributes, and skills include his:
 
 
n
unique historical perspective and insights into our operations as our former managing director of national sales;
 
 
n
operating, business, and management experience as the chief executive officer at GPA; and
 
 
n
expertise in the financial industry and deep familiarity with our advisors.
 
 
 
 
 
 
 
 
 
 
James S. Riepe, Director Since 2008
 
 
Mr. Riepe, 71, is a senior advisor and retired vice chair of the board of directors of T. Rowe Price Group,   Inc.   ("TRP"), a global investment management firm, where he worked for nearly 25 years. Previously, he served on TRP's management committee, oversaw TRP's mutual fund activities, and served as chair of the T. Rowe Price Mutual Funds. He served as chair of the board of governors of the Investment Company Institute and was a member of the board of governors of the National Association of Securities Dealers (now FINRA) and chaired its Investment Companies Committee. Mr. Riepe is a member of the board of directors of Genworth Financial Inc. (as non-executive chair), UTI Asset Management Company of India, and the Baltimore Equitable Society. He previously served as a member of the board of directors of The NASDAQ OMX Group from May 2003 until May 2014. He also served as chair of the board of trustees of the University of Pennsylvania from which he earned a B.S. and an M.B.A.
Mr. Riepe's pertinent experience, qualifications, attributes, and skills include his:
 
 
n
high level of financial literacy and operating and management experience, gained through his executive management positions and role as vice chair of the board of directors of TRP;
 
 
n
expertise in the financial industry, underscored by his over 35 years of experience in investment management and his prior roles as a member of the board of governors of FINRA and as chair of the board of governors of the Investment Company Institute; and
 
 
n
knowledge and experience gained through service on the board of other public companies.
 
 
 
 
 

2015 Proxy Statement | 8

Proposal 1: Election of Directors


 
 
 
 
 
Richard P. Schifter, Director Since 2005
 
 
Mr. Schifter, 62, is a TPG senior advisor. He was a partner at TPG from 1994 through 2013. Prior to joining TPG, Mr. Schifter was a partner at the law firm of Arnold & Porter in Washington, D.C., where he specialized in bankruptcy law and corporate restructuring. He joined Arnold & Porter in 1979 and was a partner from 1986 through 1994. Mr. Schifter currently serves on the boards of directors of American Beacon Advisors, Inc., Direct General Corporation, EverBank Financial Corp., and American Airlines Group, and on the board of overseers of the University of Pennsylvania Law School. Mr. Schifter is also a member of the board of directors of Youth, I.N.C. (Improving Non-Profits for Children). Mr. Schifter received a B.A. with distinction from George Washington University and a J.D. cum laude from the University of Pennsylvania Law School in 1978.
Mr. Schifter's pertinent experience, qualifications, attributes, and skills include his:
 
 
n
high level of financial literacy gained through his investment experience as a TPG partner;
 
 
n
experience on other company boards and board committees; and
 
 
n
nearly 15 years of experience as a corporate attorney with an internationally-recognized law firm.
 
 
 
 
 
In the vote on the election of the director nominees, stockholders may:
Vote FOR any of the nominees;
Vote AGAINST any of the nominees; or
ABSTAIN from voting as to any of the nominees.



THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE
ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES AS A DIRECTOR.

9 | 2015 Proxy Statement

Information Regarding Board and Committee Structure


Information Regarding Board and Committee Structure
During 2014 , the Board of Directors held seven meetings, of which two were held by conference call. Each of our incumbent directors attended at least 75% of the aggregate of (i) the total number of meetings of the Board of Directors during 2014 and (ii) the total number of meetings held by all committees of the Board on which the director served during 2014 .
Our Corporate Governance Guidelines provide that each director who is nominated for election is expected to attend the Annual Meeting. Each of our directors who served on the Board at the time of the 2014 annual meeting of stockholders attended such meeting.
Corporate Governance Guidelines, Committee Charters, and Code of Conduct
We believe that good corporate governance is important to ensure that we are managed for the long-term benefit of our stockholders. Our Board of Directors has adopted a set of Corporate Governance Guidelines to set clear parameters for the operation of our Board. Our Board of Directors has also adopted charters for its audit committee (the "Audit
 
Committee"), Nominating and Governance Committee, and Compensation Committee. We have adopted a Code of Conduct that applies to, among others, our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions.
Copies of our Annual Report, committee charters, Corporate Governance Guidelines, and Code of Conduct are available, free of charge, by writing to us at the following address:
LPL Financial Holdings Inc.
75 State Street
Boston, MA 02109
Attn: Investor Relations
Our Annual Report, committee charters, Corporate Governance Guidelines, and Code of Conduct are also available on our website at www.lpl.com. If we make substantive amendments to, or grant waivers from, the Code of Conduct for certain of our executive officers, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.


2015 Proxy Statement | 10

Information Regarding Board and Committee Structure


 
 
 
 
 
2014 Governance and Policy Changes
 
 
In the course of our regular review of our corporate governance policies and compensation practices, we implemented several important measures that are designed to promote long-term shareholder value and which became effective in 2014:
 
 
n
Our Board and stockholders approved amendments to our Amended and Restated Certificate of Incorporation to declassify our Board such that it is comprised of a single class of directors elected on an annual basis who may be removed with or without cause. Accordingly, our stockholders are able to register their views on the performance of all directors on an annual basis, enhancing the accountability of our Board to our stockholders.
 
 
n
We amended our bylaws to provide for a majority voting standard in uncontested director elections. We also adopted a director resignation policy in our Corporate Governance Guidelines pursuant to which a director who does not receive support from holders of a majority of shares voted in an uncontested election must tender his or her resignation and, if our Board accepts the resignation, step down from our Board. This makes director elections more meaningful for our stockholders and, like the proposed Board
de-classification, promotes accountability.
 
 
n
We amended our Insider Trading Policy to be more explicit in its prohibition of pledging and hedging practices in order to further the alignment between stockholders and our executives that our equity awards are designed to create.
 
 
n
We implemented several executive compensation-related improvements as described below under the heading “ Compensation Discussion and Analysis — How Compensation Decisions Were Made —Compensation Program Developments in 2014 ,” including establishing a compensation claw-back policy that provides for the recoupment of incentive compensation in the event of certain financial restatements and revising our stock ownership guidelines for executive officers to set ownership thresholds at a multiple of base salary.
 
 
n
We adopted robust stock ownership guidelines for directors, which provide that within five years of the date of his or her election to the Board, each non-employee director must maintain ownership of shares of Common Stock equal to five times the annual base retainer then in effect for our non-employee directors.
 
 
n
We determined to seek an advisory vote on our compensation practices annually, which underscores the careful consideration we give to our stockholders’ views on our compensation practices.
 
 
In addition, H. Paulett Eberhart, an additional independent director and audit committee financial expert, joined our Board of Directors in 2014.
 
 
 
 
 
Director Independence
The listing standards of The NASDAQ Global Select Market ("NASDAQ") require that, subject to specified exceptions, each member of a listed company's audit, nominating and governance, and compensation and human resources committees be independent. Rule 5605(a)(2) of the listing rules of NASDAQ further provides that a director will only qualify as an "independent director" if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and compensation and human resources committee members are also subject to heightened independence criteria under NASDAQ rules.
 
After its evaluation of director independence, the Board of Directors has affirmatively determined that Messrs. Boyce, Brennan, Putnam, Riepe, and Schifter and Mses. Eberhart and Mulcahy are independent directors under the applicable rules of NASDAQ. Messrs. Brennan and Riepe and Ms. Eberhart are also independent directors as such term is defined in Rule 10A-3(b)(1) under the Exchange Act, and Messrs. Boyce, Brennan, and Riepe and Ms. Mulcahy are independent under the heightened criteria applicable to compensation and human resources committee members. In accordance with listing standards of NASDAQ, a majority of our directors are independent.
Board Composition and Leadership Structure of the Board of Directors
Our business and affairs are managed under the direction of the Board of Directors. Our Board of


11 | 2015 Proxy Statement

Information Regarding Board and Committee Structure


Directors is currently composed of eight directors. Under our Amended and Restated Certificate of Incorporation, the number of directors shall be not fewer than three and not more than 15. The authorized number of directors may be changed only by resolution of the Board of Directors.
The Board does not have a fixed policy regarding the separation of the offices of chair of the Board and chief executive officer and believes that it should maintain the flexibility to select the chair of the Board and its Board leadership structure, from time to time, based on the criteria that it deems to be in the best interests of the Company and its stockholders. At this time, the offices of the chair of the Board and the chief executive officer are combined, with Mr. Casady serving as chair and chief executive officer. He has served in this role since December 2005. With 33 years of experience in the financial services industry, including 13 years with us, Mr. Casady has the knowledge, expertise, and experience to understand the opportunities and challenges facing us, as well as the leadership and management skills to promote and execute our values and strategy.
In connection with our initial public offering in November 2010, in accordance with best practices, the Board established the position of lead director. Since February 2014, Mr. Riepe has served in that role, performing many of the functions that an independent chair would perform for the Company. Those functions include serving as a key source of communication between the independent directors and the chief executive officer, consulting with the chair of the Board in establishing the agenda for each meeting of the Board, and coordinating the agenda for and leading meetings of the independent directors, as needed.
The Company believes that having the same person serve as chief executive officer and chair focuses leadership, responsibility, and accountability in a single person and that having a lead director provides for effective checks and balances and the ability of the independent directors to work effectively in the Board setting.
Board Committees
The current standing committees of the Board of Directors are the Audit Committee, the Nominating and Governance Committee, and the Compensation Committee, each with the composition and responsibilities described below. The members of each committee were recommended by the Nominating and Governance Committee, appointed by the Board of Directors, and will serve until their successors are elected and qualified, unless they are removed earlier or resign. In addition, from time to
 
time, special committees may be established under the direction of the Board of Directors when necessary to address specific issues. Each of the standing committees of our Board is chaired by an independent director.
Audit Committee
Our Audit Committee is composed of the following members: John J. Brennan, H. Paulett Eberhart, and James S. Riepe. Mr. Brennan serves as the Chair of the Audit Committee.
Each of our Audit Committee members is independent under the listing standards of NASDAQ and under Rule 10A-3 of the Exchange Act. None of our Audit Committee members is or has been an employee of ours or any of our subsidiaries, nor simultaneously serves on the audit committees of more than three public companies, including ours. All of our Audit Committee members meet the requirements for financial literacy and are able to read and understand fundamental financial statements, including the Company's balance sheet, income statement, and cash flow statement. Our Board has affirmatively determined that each of Mr. Brennan and Ms. Eberhart qualifies as an audit committee financial expert under the applicable rules and regulations of the SEC.
 
 
 
 
 
Our Audit Committee is responsible for, among other things, appointing, overseeing, and replacing, if necessary, the independent auditor and assisting the Board in overseeing:
 
 
n
the integrity of the Company's consolidated financial statements;
 
 
n
the integrity of the accounting and financial reporting processes of the Company;
 
 
n
enterprise risk management, including the Company's compliance with legal and regulatory requirements;
 
 
n
the Company's independent auditor's qualifications and independence; and
 
 
n
the performance of the Company's independent auditor and internal audit function.
 
 
 
 
 
In addition, the Audit Committee prepares the Audit Committee report required by the SEC to be included in our Annual Report or our proxy statement.
The Audit Committee has authority under its charter to obtain advice and assistance from outside legal counsel, accounting, or other outside advisors as deemed appropriate to perform its duties and responsibilities.
Our Audit Committee met ten times during 2014 .


2015 Proxy Statement | 12

Information Regarding Board and Committee Structure


Nominating and Governance Committee
Our Nominating and Governance Committee is composed of the following members: John J. Brennan, Anne M. Mulcahy, James S. Putnam, and Richard P. Schifter. Mr. Schifter serves as Chair of the Nominating and Governance Committee, which recommended individuals for election as directors of the Company at the Annual Meeting. Each member of our Nominating and Governance Committee is independent under the listing standards of NASDAQ.
 
 
 
 
 
The Nominating and Governance Committee is responsible for:
 
 
n
identifying, evaluating, and recruiting qualified persons to serve on our Board of Directors;
 
 
n
selecting, or recommending to the Board for selection, nominees for election as directors;
 
 
n
reviewing and recommending the composition of the Board's standing committees;
 
 
n
reviewing and assessing the Company's corporate governance guidelines; and
 
 
n
evaluating the performance, operations, size, and composition of our Board of Directors.
 
 
 
 
 
The Nominating and Governance Committee has authority under its charter to engage such independent legal, accounting, and other advisors as it deems necessary or appropriate to carry out its responsibilities. In 2014, Spencer Stuart, a director search firm, assisted the Nominating and Governance Committee in identifying, evaluating, and recruiting potential director candidates.
Our Nominating and Governance Committee met once during 2014 . Our Board as a whole also considered the identification, recruitment, and nomination of director candidates.
Compensation and Human Resources Committee
Our Compensation Committee is composed of the following members: Richard W. Boyce, John J. Brennan, Anne M. Mulcahy, and James S. Riepe. Ms. Mulcahy serves as the Chair of the Compensation Committee. Each member of our Compensation Committee is independent under the listing standards of NASDAQ, including the heightened standards that apply to compensation committee members.
 
 
 
 
 
 
The Compensation Committee is responsible for:
 
 
n
reviewing and approving goals and objectives relevant to executive officer compensation and evaluating the performance of executive officers in light of the goals and objectives;
 
 
n
reviewing and approving executive officer compensation;
 
 
n
reviewing and approving the chief executive officer's compensation based upon the Compensation Committee's evaluation of the chief executive officer's performance;
 
 
n
making recommendations to the Board of Directors regarding the adoption of new incentive compensation and equity-based plans, and administering our existing incentive compensation and equity-based plans;
 
 
n
making recommendations to the Board of Directors regarding compensation of the Board members and its committee members;
 
 
n
reviewing and discussing with management the compensation discussion and analysis to be included in our proxy statement and preparing an annual Compensation Committee report for inclusion in our annual proxy statement;
 
 
n
reviewing and approving generally any significant non-executive compensation and benefits plans;
 
 
n
reviewing our significant policies, practices, and procedures concerning human resource-related matters; and
 
 
n
overseeing any other such matters as the Board of Directors shall deem appropriate from time to time.
 
 
 
 
 
The Compensation Committee has authority under its charter to access such internal and external resources, including retaining legal, financial, or other advisors, as the Compensation Committee deems necessary or appropriate to fulfill its responsibilities. In 2014 , the Compensation Committee engaged an independent compensation consultant, Meridian Compensation Partners, LLC (the "Compensation Consultant"), to advise on compensation matters and provide experiential guidance on what is considered fair and competitive practice in the industry, primarily with respect to the compensation of the executive officers.
The Compensation Committee also has the authority to delegate to subcommittees of the Compensation Committee any responsibilities of the full committee. The Compensation Committee has established a subcommittee, composed entirely of “outside


13 | 2015 Proxy Statement

Information Regarding Board and Committee Structure


directors” within the meaning of Section 162(m) of the Internal Revenue Code and “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act, to administer our LPL Financial Holdings Inc. Corporate Executive Bonus Plan and approve equity issuances in accordance with Section 16(b) of the Exchange Act. The Compensation Committee may also delegate to a committee of one or more directors, or one or more of our executive officers, subject to certain restrictions, the power to grant stock options, restricted stock units, or other equity awards, and amend the terms of such awards, pursuant to our equity plans. References to the Compensation Committee in this proxy statement also refer to its subcommittees and its delegates, where applicable.
Our Compensation Committee met seven times during 2014 .
Equity Grants Practices
The exercise price of each stock option awarded under the 2010 Omnibus Equity Incentive Plan (the "2010 Plan") is the closing price of the Common Stock on the date of grant.
The Board has delegated to a committee, consisting in accordance with Delaware law of the chair of the Board (the "Equity Committee"), the authority to grant to an eligible participant under the 2010 Plan, other than an executive officer:
stock options to purchase up to a number of shares of Common Stock as determined by dividing $500,000 by one-third of the closing price of the Common Stock on the date of grant; and
restricted stock units ("RSUs"), with any individual grant limited to the number of RSUs determined by dividing $500,000 by the closing price of the Common Stock on the grant date.
The stock options and RSUs currently granted pursuant to this delegated authority vest, in the discretion of the Equity Committee, either (i) ratably over three years or (ii) in full on the second or third anniversary of the grant date. Options granted pursuant to this delegated authority prior to December 17, 2013 vest either (i) ratably over four or five years or (ii) in full on the second or third anniversary of the grant date.
In addition, the Compensation Committee has delegated to our Chief Human Capital Officer the authority to grant to an employee of the Company, other than an executive officer:
stock options to purchase up to a number of shares of Common Stock as determined by
 
dividing $500,000 by one-third of the closing price of the Common Stock on the date of grant; and
RSUs, with any individual grant limited to the number of RSUs determined by dividing $500,000 by the closing price of the Common Stock on the grant date.
The stock options and RSUs currently granted pursuant to this delegated authority vest ratably over three years, and, in addition to the individual limits described above, the total aggregate number of shares of Common Stock underlying stock options and RSUs granted by the Chief Human Capital Officer in any fiscal year may not exceed one million. Stock options granted pursuant to this delegated authority prior to December 17, 2013 vest ratably over four or five years.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has been an officer or employee of ours or any of our subsidiaries. None of our executive officers serves or has served as a member of the board of directors, compensation committee, or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our Compensation Committee.
Risk Management and Compensation Policies and Practices
We employ an enterprise risk management ("ERM") framework that is intended to address key risks and responsibilities, enable us to execute our business strategy, and protect our firm and its franchise. Our framework is designed to promote clear lines of risk management accountability and a structured escalation process for key risk information and events. In addition to the ERM framework, we have written policies and procedures that govern the conduct of business by our advisors and employees, and the terms and conditions of our relationships with product manufacturers.
Our risk management governance approach is discussed in our Annual Report under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk Risk Management." The ERM framework includes the Board of Directors, the Audit Committee, and the Compensation Committee, as well as the Company's Risk Oversight Committee (the “ROC”) and its subcommittees, the Company's Internal Audit department, the Company's Governance, Risk and Compliance department, and business line management.


2015 Proxy Statement | 14

Information Regarding Board and Committee Structure


Role of the Audit Committee . In addition to its other responsibilities, the Audit Committee reviews our policies with respect to risk assessment and risk management, as well as our major financial risk exposures and the steps management has undertaken to control them. The Audit Committee provides reports to the Board at each of the Board’s regularly scheduled quarterly meetings.
The Audit Committee has mandated that the ROC oversee our risk management activities, including those of our subsidiaries. The chair of the ROC provides reports to the Audit Committee at each of the Audit Committee’s regularly scheduled quarterly meetings and, as necessary or requested, to the Board. The reports generally cover topics addressed by the ROC at its meetings since the immediately preceding report. If warranted, matters of material risk are escalated to the Audit Committee or Board more frequently. In addition, our Internal Audit department provides independent verification of the effectiveness of the Company’s internal controls by conducting risk assessments and audits designed to identify and cover important risk categories. Our Internal Audit department provides regular reports to the ROC and reports to the Audit Committee at least as often as quarterly.
Role of the Compensation Committee . In addition to its other responsibilities, the Compensation Committee assesses whether our compensation arrangements encourage inappropriate risk-taking, and whether risks arising from our compensation arrangements are reasonably likely to have a material adverse effect on the Company.
Our Compensation Committee has reviewed and evaluated the philosophy and standards on which our compensation practices have been developed and implemented across our Company. It is our belief that our compensation practices do not encourage inappropriate actions by our executive officers and are not reasonably likely to have a material adverse effect on the Company. Specifically, we believe that our compensation practices and process avoid:
a compensation mix overly weighted toward annual bonus awards;
an excessive focus on short-term equity incentive awards that would cause behavior to drive short-term stock price gains in lieu of long-term value creation; and
unreasonable financial goals or thresholds that would encourage efforts to generate near-term revenue with an adverse impact on long-term success.
We believe that our current business process and planning cycle fosters the following behaviors and
 
controls that would mitigate the potential for adverse risk caused by the action of our executive officers:
we have defined processes for developing strategic and annual operating plans, approval of capital investments, internal controls over financial reporting, and other financial, operational, and compliance policies and practices;
annual review of corporate objectives aligns these goals with our annual operating and strategic plans, achieves the proper risk reward balance, and does not encourage unnecessary or excessive risk taking;
annual incentive awards are based on a review of a variety of metrics, including both financial performance and strategic achievements, reducing the potential to concentrate on one metric as the basis of an annual incentive award;
the mixes between fixed and variable, annual and long-term, and cash and equity compensation are designed to encourage strategies and actions that are in our long-term best interests;
discretionary authority is maintained by the Compensation Committee to adjust annual bonus funding and payments, which reduces business risk associated with our cash bonus program;
long-term equity incentive awards vest over a period of time, and as a result of the longer time horizon to receive the value of an equity award, the prospect of short-term or risky behavior is mitigated; and
our program includes stock ownership requirements for all executive officers, a "clawback" policy, and anti-hedging policies that help to mitigate issues associated with excessive risk-taking.
Communicating with the Board of Directors
Any stockholder who wishes to contact a member of our Board of Directors may do so by writing to the following address:
Board of Directors
c/o Secretary
LPL Financial Holdings Inc.
75 State Street
Boston, MA 02109
Communications will be distributed to the chair of the Board or the other members of the Board as appropriate depending on the facts and circumstances outlined in the communication received.


15 | 2015 Proxy Statement

Board of Director Compensation


Board of Director Compensation
Pursuant to our Board of Directors compensation policy, each of our non-employee directors receives a $65,000 annual retainer. The following table sets forth additional annual payments that a committee member receives for his or her additional duties:
 
Chair
 
Each Other Member
Audit Committee
$
20,000

 
$
10,000

Compensation Committee
$
15,000

 
$
7,500

Nominating and
     Governance Committee
$
10,000

 
$
5,000

We pay our lead director an additional annual fee of $15,000 in connection with his or her duties. We pay cash compensation to our non-employee directors quarterly. Mr. Casady does not receive any additional compensation for his service as director.
In the past, grants of stock options have supplemented the compensation paid to certain directors. In 2010, we began granting awards of restricted stock to our directors in lieu of stock options, and we now grant an annual award of restricted stock under our 2010 Plan to each non-employee director. The award, which is granted on
 
the next business day following the Company's annual meeting of stockholders, has a value of $130,000 (based on the closing price of the Common Stock on the date of grant) and vests in full on the second anniversary of the date of grant. We believe these grants of equity serve to further align our directors' interests with the interests of our stockholders.
In March 2014, the Board amended and restated the equity ownership guidelines for non-employee directors to provide that within five years of the date of his or her election to the Board, each non-employee director must maintain ownership of shares of Common Stock equal to five times the annual base retainer then in effect for our non-employee directors, not including any committee retainers. All shares owned outright and beneficially owned by such non-employee director, including all shares of unvested restricted stock, are counted in determining compliance with such minimum ownership. Neither vested nor unvested stock options are counted, however. As of March 27, 2015 , each of our non-employee directors who have served for at least five years satisfied the minimum ownership threshold.

The following table sets forth the compensation received from us by each of the non-employee directors for service on the Board for the fiscal year ended December 31, 2014 . In addition to the payments disclosed in the table below, our directors are reimbursed for reasonable out-of-pocket expenses incurred in connection with their attendance at Board and committee meetings.
Name
Fees Earned
or Paid in Cash
($)
 
Stock
Awards
($) (1)(2)
 
Total
($)
Richard W. Boyce
$
72,500

 
$
129,989

 
$
202,489

John J. Brennan
$
97,500

 
$
129,989

 
$
227,489

H. Paulett Eberhart (3)
$
8,356

 
$
59,093

 
$
67,449

Anne M. Mulcahy
$
79,912

 
$
129,989

 
$
209,901

James S. Putnam
$
65,625

 
$
129,989

 
$
195,614

James S. Riepe
$
107,500

 
$
129,989

 
$
237,489

Richard P. Schifter
$
77,500

 
$
129,989

 
$
207,489

Total Compensation Mix
(1)
The amounts shown in this column represent the aggregate grant date fair value of restricted stock awards granted to our non-employee directors in 2014 . The aggregate grant date fair value of these awards, as determined under FASB ASC Topic   718, was determined by multiplying the number of shares underlying the award by the closing price of our Common Stock on the grant date. The grant date weighted-average fair value per share of each share of restricted stock granted to these directors in 2014 was $48.62. For information regarding the number of shares of restricted stock outstanding held by each non-employee director as of December 31, 2014 , see the column " Restricted Stock Awards " in the table in footnote 2 below.

2015 Proxy Statement | 16

Board of Director Compensation


(2)
The following table shows, for each of our non-employee directors, the aggregate number of stock options and shares of restricted stock held as of December 31, 2014 . All stock options reported in the table below were vested in full as of December 31, 2014.
Name
 
Stock Option Awards
(#)
 
Restricted Stock Awards
(#)
Richard W. Boyce
 

 
5,406

John J. Brennan
 

 
5,406

H. Paulett Eberhart (3)
 

 
1,410

Anne M. Mulcahy
 

 
5,194

James S. Putnam
 

 
5,406

James S. Riepe
 
31,500

 
5,406

Richard P. Schifter
 

 
5,406

(3)
Ms. Eberhart began her service on November 24, 2014. The amounts represent her pro rata fees and annual equity grant.

17 | 2015 Proxy Statement

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

Proposal 2: Approval of the Amendment and Restatement of the LPL Financial Holdings Inc. Omnibus Equity Incentive Plan
At the Annual Meeting, stockholders will be asked to approve the amendment and restatement of the 2010 Plan (the “Amended Equity Plan”), including the reservation of additional shares of our Common Stock for issuance under the Amended Equity Plan and the material terms of certain future performance awards granted under the Amended Equity Plan. Prior to its amendment and restatement, the 2010 Plan was adopted by the Board on June 17, 2010 and approved by stockholders on June 18, 2010. The Amended Equity Plan was adopted by the Board, acting on the recommendation of our Compensation Committee, on March 3, 2015 (the “Amendment Date”) and will become effective upon receiving stockholder approval at the Annual Meeting.
The Board believes that equity and equity-based awards are important to incentivize our key employees (including our executive officers) and directors to remain with the Company, to motivate them to help achieve our corporate objectives, and to align their interests with those of our stockholders. Based upon its review and consideration of:
the remaining shares available for awards under the 2010 Plan;
the Company’s historic rates of equity award issuances;
the dilutive impact to stockholders;
equity plan guidelines established by certain institutional investors and proxy advisory firms; and
advice provided by the Compensation Consultant,
the Board approved the Amended Equity Plan and the share pool authorized for issuance under it, as described below.
The Board believes that the Amended Equity Plan will continue to promote the interests of stockholders consistent with principles of good corporate governance, including:
Independent Committee. The Amended Equity Plan will continue to be administered by our Compensation Committee and its authorized delegates, except that our Board may delegate to a committee of the Board the authority to grant awards under the plan to participants other than officers (within the meaning of Rule 16a-1(f) of the Exchange Act) and executive officers (within the meaning of Rule 3b-7 of the Exchange Act). The Compensation Committee is composed entirely of directors who meet the
 
NASDAQ standards for independence, including the heightened standards applicable to compensation committee members.
Limits on Awards. The Amended Equity Plan limits the number of stock options, stock appreciation rights (“SARs”), and other awards that may be granted to any person in any calendar year, as well as the amount that may be payable to any person in any calendar year under cash awards made pursuant to the plan. As discussed below under "Summary of the Amended Equity Plan Individual and Non-Employee Director Limits," the Amended Equity Plan now also includes a separate limit that applies to awards granted to our non-employee directors.
No Discounted Stock Options or SARs. All stock option and SAR awards under the Amended Equity Plan must have an exercise price or base value that is not less than the fair market value of an underlying share of our Common Stock on the date of grant.
Performance Awards. Under the Amended Equity Plan, our Compensation Committee may continue to grant performance-based awards, including awards that are intended to qualify as exempt performance-based compensation under Section 162(m) (“Section 162(m)”) of the Internal Revenue Code of 1986, as amended (the “Code”).
In addition, the Amended Equity Plan includes the following new provisions, which the Board believes will further strengthen our commitment to good corporate governance:
No Repricing. Other than in connection with a corporate transaction affecting the Company, the Amended Equity Plan prohibits any repricing of stock options or SARs without obtaining stockholder approval in accordance with NASDAQ requirements.
Fungible Share Design. Each “full value” award granted under the Amended Equity Plan (meaning, each award other than a stock option or SAR), will be counted against the share pool at a ratio of three shares for each one share underlying the award. Stock options and SARs will be counted against the share pool as one share for each share underlying the award.
Limit on Non-Employee Director Awards. The Amended Equity Plan applies a separate limit to awards granted to our non-employee directors.


2015 Proxy Statement | 18

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

Awards Subject to Recoupment. Awards under the Amended Equity Plan are subject to clawback under the Company’s recoupment policy or as otherwise required by law or applicable listing standards.
No Liberal Share Recycling. Shares retained or withheld by or delivered to the Company to satisfy the purchase or exercise price of (or withholding taxes applicable to) an award and the total number of shares subject to a SAR, any portion of which is settled in shares, reduce the number of shares available for issuance under the Amended Equity Plan. In addition, the number of shares available for delivery under the Amended Equity Plan will not be increased by any shares that have been delivered under the Amended Equity Plan that are subsequently repurchased using proceeds directly attributable to stock option exercises.
Background Information on Proposed Share Increase
In determining the number of additional shares that will be available for future awards under the Amended Equity Plan, our Board considered the importance of equity awards in our compensation program, our historic rates of equity award issuances (typically referred to as our “burn rate”), the number of shares currently available for awards under the 2010 Plan, and the potential dilutive effect to our stockholders. The following discussion provides information on the shares subject to outstanding awards under our 2010 Plan and our Prior Plans (as defined below) as of March 3, 2015 , and on the proposed number of additional shares that will be available for future awards under the Amended Equity Plan. This information is intended to provide stockholders with additional context to use in evaluating the Proposed Share Increase (as defined below).
Proposed Share Increase
If the Amended Equity Plan is approved, an additional 8,000,000 shares will be available for future awards under the Amended Equity Plan (the “Proposed Share Increase”), and the total number of shares
 
available for future awards under the Amended Equity Plan will be 20,988,360 shares, which is the sum of the following:
8,000,000 shares under the Proposed Share Increase, plus
6,335,457 shares available for grant under our 2010 Plan as of the Amendment Date, plus
a maximum of 4,722,688 shares subject to previously-granted awards outstanding under our 2010 Plan as of the Amendment Date (“Outstanding Awards”) to the extent expired, terminated, or forfeited without the issuance of shares thereunder, plus
a maximum of 1,930,215 shares subject to previously-granted awards outstanding under our Prior Plans as of the Amendment Date (“Prior Plan Awards”) to the extent expired, terminated, or forfeited without the issuance of shares thereunder.
Fiscal 2014 Equity Grants
At present, we grant equity awards only under our 2010 Plan. Equity awards are also outstanding, but are no longer being issued, under the Company's 2005 Stock Option Plan for Non-Qualified Stock Options, 2005 Stock Option Plan for Incentive Stock Options, 2008 Stock Option Plan and Advisor Incentive Plan (collectively, the “Prior Plans”).
In 2014, the Company granted stock options, restricted stock units, and restricted stock awards under the 2010 Plan covering a total of approximately 1,161,596 shares. Our 2014 gross burn rate, which we calculate as total shares underlying awards granted in 2014 divided by our 2014 weighted-average total shares of Common Stock outstanding, was 1.1%. Our 2014 net burn rate, which we calculate as total shares underlying awards granted in 2014 less cancelled or forfeited awards divided by our 2014 weighted-average total shares of Common Stock outstanding, was 0.7%.


19 | 2015 Proxy Statement

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

Potential Dilution
The following table provides information as of the Amendment Date regarding the number of shares subject to each type of outstanding award under our 2010 Plan and our Prior Plans, the number of shares available for future grants under our 2010 Plan, the number of shares under the Proposed Share Increase, and the dilutive impact of each to our stockholders.
 
Number of shares
 
As a percentage of stock outstanding on a fully diluted basis
Outstanding stock options and warrants
6,194,662

 
5.3
%
 
Outstanding restricted stock units
432,517

 
0.4
%
 
Outstanding restricted stock awards
25,724

 
%
 
Other outstanding equity awards

 
%
 
Total shares subject to outstanding awards under the 2010 Plan and Prior Plans
6,652,903

 
5.7
%
 
Total shares available for future awards under the 2010 Plan
6,335,457

 
5.4
%
 
Proposed Share Increase for future awards under the Amended Equity Plan
8,000,000

 
6.8
%
 
Total
20,988,360

 
17.8
%
 
 
 
 
 
 

As indicated by the numbers in the table above, as of the Amendment Date, our potential dilution under our 2010 Plan and our Prior Plans was 11.1%. If the Amended Equity Plan is approved, our potential dilution will be 17.8% .
Our Compensation Committee recognizes that the granting of awards under our equity incentive program, while an important element of our compensation program, is potentially dilutive to our stockholders. This potential dilutive effect is mitigated by our share repurchase program, described more fully in Note 14 , Stockholders' Equity , in our Annual Report. In 2014, we repurchased over $275 million (or 5,899,209 shares) of our Common Stock, relative to 1,161,596 shares of Common Stock subject to awards granted under our 2010 Plan during that same year. The amount of repurchases in future years will depend on a number of factors, such as the availability of cash and our stock price.
Reasons for Seeking Stockholder Approval
The Board believes that equity grants are an essential part of the Company’s compensation program. The Board also believes that the Company’s ability to attract and retain talented employees and directors and a strong alignment of their interests with those of our stockholders are key factors to our success. Stockholder approval of the Amended Equity Plan would allow us to continue to promote achievement of goals that drive long-term stockholder value and to attract and retain directors, executives, and other employees with equity and equity-based incentives. Based on the advice of the Compensation Consultant, the Company estimated that the availability of an additional 8,000,000 shares
 
of our Common Stock under the Proposed Share Increase would provide a sufficient additional number of shares to enable the Company to continue to make awards at historical average annual rates for the next four to five years, taking into account the Compensation Committee’s 2013 decision to begin issuing restricted stock units, in addition to stock options, as part of our annual long-term equity grants and the share counting rules in the Amended Equity Plan (described below).
In addition, stockholder approval of the Amended Equity Plan would preserve our ability to grant cash and stock-based incentive awards under the Amended Equity Plan that may qualify as performance-based compensation under Section 162   (m). Section 162   (m) generally provides that compensation provided to a publicly held corporation’s CEO or any of its three most highly paid named executive officers (other than its CEO or CFO) is not deductible by the corporation for U.S. income tax purposes for any taxable year to the extent it exceeds $1 million. This limitation does not apply to compensation that qualifies as exempt performance-based compensation by meeting certain requirements under Section 162   (m). These requirements include (among other things) that the following terms must be disclosed to and approved by the stockholders before the compensation is paid:
a description of the employees eligible to receive such awards;
a per-person limit on the number of shares subject to stock options and performance-based stock awards and on the amount of any cash award that may be granted to any employee under the plan in any year; and


2015 Proxy Statement | 20

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

a description of the business criteria upon which the performance goals for performance-based awards may be granted (or become vested or exercisable).
As discussed in more detail below under "Summary of the Amended Equity Plan Individual and Non-Employee Director Limits," to enable the Company to provide fair and competitive compensation to our executive officers, relative to our peers, the Board has increased the applicable Section 162(m) limits on awards granted to participants in any year under the Amended Equity Plan from such limits under the 2010 Plan.
Although stockholder approval is one of the requirements for exemption under Section 162(m), even with stockholder approval, our Board and Compensation Committee cannot guarantee that compensation intended to be exempt performance-based compensation under Section 162(m) will be treated as such. In addition, as discussed below in our "Compensation Discussion and Analysis," our Compensation Committee has and will continue to have authority to award or approve compensation that is not deductible under Section 162(m) in order to provide competitive levels of total compensation for our executive officers in a manner designed to incentivize achievement of our strategic goals and objectives.
If stockholders do not approve this Proposal 2, the Amended Equity Plan will not be effective, the 2010 Plan will continue in accordance with its terms, we would not be able to make the additional 8,000,000 shares available for future equity grants under the Proposed Share Increase (and, therefore, we would have a limited number of shares available for future equity grants) and we would not be able to grant awards treated as deductible performance-based compensation under Section 162(m).
Summary of the Amended Equity Plan
A copy of the Amended Equity Plan is attached as Appendix A to this proxy statement. The following description of certain features of the Amended Equity Plan is qualified in its entirety by reference to the full text of the plan, which we encourage stockholders to read in its entirety.
Administration
The Amended Equity Plan is administered by our Compensation Committee and its authorized delegates, except that our Board may delegate to a committee of the Board the authority to grant awards under the plan to participants other than officers
 
(within the meaning of Rule 16a-1(f) of the Exchange Act) and executive officers (within the meaning of Rule 3b-7 of the Exchange Act). Our Compensation Committee has the authority to, among other things, interpret the Amended Equity Plan, determine eligibility for, grant and determine the terms of awards under the Amended Equity Plan, determine the form of settlement of awards (whether in cash, shares of our Common Stock, or other property), prescribe forms, rules, and procedures relating to the Amended Equity Plan, and do all other things necessary or appropriate to carry out the purposes of the Amended Equity Plan. Our Compensation Committee’s determinations under the Amended Equity Plan are conclusive and binding.
Term
No awards will be made after the date that is one day before the tenth anniversary of the Adoption Date, but previously granted awards may continue beyond that date in accordance with their terms.
Eligibility
Our key employees, registered representatives, directors, consultants, and advisors are eligible to participate in the Amended Equity Plan. Unless our Compensation Committee determines otherwise, eligibility is further limited to those persons as to whom the use of a Form S-8 registration statement is permissible. As of March 27, 2015 participants in the 2010 Plan included our 14 executive officers, plus 2,996 consultants and advisors, and 7 non-employee directors.
Authorized Shares
Subject to adjustment, as described below, the maximum number of shares of our Common Stock as of the Amendment Date that may be delivered in satisfaction of awards under the Amended Equity Plan is 20,988,360 shares of our Common Stock (the “Share Pool”). The Share Pool is described in more detail above under “ Background Information on Proposed Share Increase.”
In general, the number of shares of our Common Stock issued under the Amended Equity Plan will include only the number of shares actually issued under the Amended Equity Plan, and will not include shares subject to an award to the extent the award expires, terminates, or is forfeited without the issuance of shares, except that shares retained or withheld by or delivered to the Company to satisfy any purchase or exercise price or tax withholding obligation will be treated as issued under the Amended Equity Plan. In addition, the total number of shares subject to a SAR, any portion of which is settled in shares of our Common Stock, will be


21 | 2015 Proxy Statement

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

treated as issued under the Amended Equity Plan. The Share Pool will not be increased by any shares that have been delivered under the Amended Equity Plan that are subsequently repurchased using the proceeds directly attributable to stock option exercises.
Each share of our Common Stock underlying an option or SAR granted under the Amended Equity Plan will count against the Share Pool as one share, and each share of our Common Stock underlying any other award granted under the Amended Equity Plan will count against the Share Pool as three shares. Any shares that become available again pursuant to awards granted under the Amended Equity Plan will be returned to the Share Pool at the rates described in the preceding sentence, meaning that one share of Common Stock will become available again for each share underlying any portion of a stock option or SAR that is forfeited and three shares of our Common Stock will become available again for each share underlying any portion of an award that is not a stock option or SAR that is forfeited. Any shares that become available for grant under the Amended Equity Plan pursuant to Outstanding Awards or Prior Plan Awards (to the extent expired, terminated, forfeited, or satisfied without the issuance of shares) will be returned to the Share Pool at the rate of one share for each share underlying such an award.
Subject to adjustment, as described below, no more than 10,000,000 shares of our Common Stock may be delivered in satisfaction of incentive stock options (“ISOs”) awarded under the Amended Equity Plan.
The shares of our Common Stock to be issued under the Amended Equity Plan may be authorized but unissued shares of our Common Stock or previously issued shares of our Common Stock acquired by us.
Individual and Non-Employee Director Limits
The maximum number of shares of our Common Stock subject to stock options and the maximum number of shares of our Common Stock subject to SARs that may be granted to any participant under the Amended Equity Plan in any calendar year is 1,000,000 shares. The maximum number of shares of our Common Stock subject to other awards that may be granted to any participant under the Amended Equity Plan in any calendar year is 500,000 shares. The maximum amount payable to any person in any calendar year under a cash award is $10,000,000. For the reasons described above under "Reasons for Seeking Stockholder Approval," these limits have been increased from the limits applicable to such awards under the 2010 Plan, which were 400,000 shares with respect to stock options and
 
SARs, 100,000 shares with respect to awards other than stock options and SARs, and $5,000,000 with respect to cash awards. A separate limit applies to non-employee directors, who may not receive awards in excess of $500,000 in aggregate grant date fair value in any calendar year. This limit does not apply, however, to any award or shares of stock granted pursuant to a director’s election to receive an award or shares of stock in lieu of cash retainers or other fees.
Types of Awards
The Amended Equity Plan provides for awards of stock options, SARs, restricted stock, unrestricted stock, stock units, performance awards, cash awards and other awards convertible into or otherwise based on shares of our Common Stock. Eligibility for stock options intended to be ISOs is limited to our employees. Dividend equivalents may also be provided in connection with an award under the Amended Equity Plan.
Stock options and SARs. The Amended Equity Plan provides for the grant of ISOs, nonqualified stock options (“NSOs”), and SARs. The exercise price of a stock option, and the base price against which a SAR is to be measured, may not be less than the fair market value (or, in the case of an ISO granted to a ten percent shareholder, 110% of the fair market value) of a share of our Common Stock on the date of grant. Our Compensation Committee will determine the time or times at which stock options or SARs become exercisable and the terms on which such awards remain exercisable. Stock options and SARs will generally have a maximum term of ten years, except that, with respect to NSOs or SARs granted on or after the Amendment Date, if a participant still holding an outstanding but unexercised NSO or SAR 10 years from the date of grant (or, in the case of an NSO or SAR with a maximum term of less than 10 years, such maximum term) is prohibited by applicable law or a written policy of the Company applicable to similarly situated employees from engaging in any open-market sales of our Common Stock, and if at such time our Common Stock is publicly traded (as determined by the Administrator), the maximum term of such Award will instead be deemed to expire on the 30 th day following the date the participant is no longer prohibited from engaging in such open market sales. SARs are payable in cash, in shares of our Common Stock or in a combination of cash and shares.
Restricted and unrestricted stock. A restricted stock award is an award of shares of our Common Stock subject to forfeiture restrictions, while an unrestricted stock award is not subject to such restrictions.


2015 Proxy Statement | 22

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

Stock units. A stock unit award is an award denominated in shares of our Common Stock that entitles the participant to receive shares of our Common Stock or cash measured by the value of the shares of our Common Stock in the future. The delivery of shares of our Common Stock or cash under a stock unit may be subject to the satisfaction of performance conditions or other vesting conditions.
Performance awards. A performance award is an award the vesting, settlement, or exercisability of which is subject to specified performance criteria.
Cash Awards . A cash award is an award denominated in cash.
Other awards. Other awards are awards that are convertible into or otherwise based on shares of our Common Stock.
Vesting
The Compensation Committee has the authority to determine the vesting schedule applicable to each award, and to accelerate the vesting or exercisability of any award.
Termination of Employment or Service
The Compensation Committee determines the effect of termination of employment or service on an award. Unless otherwise provided by our Compensation Committee or the Company's amended and restated executive severance plan (the "Executive Severance Plan"), upon a termination of a participant’s employment or service, all unvested stock options and SARs then held by the participant will terminate, all other unvested awards will be forfeited and all vested stock options and SARs then held by the participant will remain outstanding following such termination for 90 days, one year in the case of death or disability or two years in the case of retirement (as defined in the Amended Equity Plan), or, in each case, until the applicable expiration date, if earlier. All stock options and SARs held by a participant immediately prior to the participant’s termination of employment or service will immediately terminate if such termination is for cause, as defined in the Amended Equity Plan.
Performance Awards
The Amended Equity Plan provides for the grant of performance awards that are made based upon, and subject to achieving, performance objectives. Performance objectives with respect to those awards that are intended to qualify as “performance-based compensation” for purposes of Section 162(m), to the extent applicable, are limited to an objectively determinable measure (or measures) of performance
 
relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project, or geographical basis or in combinations thereof): sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization, or equity expense, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital, capital employed, or assets; one or more operating ratios, including ratios that measure operating income or profit, including on an after-tax basis; one or more relative measures of revenues and earnings, including “gearing” measures based on revenues or earnings, in each case before or after deduction of any portion of revenues or earnings; pre-tax net income; after-tax net income; operating revenue growth; borrowing levels, leverage ratios, or credit rating; market share; capital expenditures; cash flow; stock price; earnings per share, stockholder return or value; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups, and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity), or refinancings; increase in assets under management, administration, or custody; changes between years or periods that are determined with respect to any of the foregoing; and any derivations of any of the foregoing. A performance objective and any applicable targets need not be based upon an increase, a positive or improved result or avoidance of loss.
To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m), to the extent applicable, our Compensation Committee may provide in the case of any award intended to qualify for such exception that one or more of the performance objectives applicable to such award will be adjusted in an objectively determinable manner to reflect events occurring during the performance period that affect the applicable performance objectives.
Non-Transferability of Awards
In general, awards under the Amended Equity Plan may not be transferred other than by the laws of descent and distribution. Our Compensation Committee may permit the gratuitous transfer of awards other than ISOs, subject to such limitations as it may impose in its discretion.


23 | 2015 Proxy Statement

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

Recovery of Compensation
Our Compensation Committee may cancel, rescind, withhold or otherwise limit or restrict any award at any time under the Amended Equity Plan if the participant is not in compliance with the provisions of the Amended Equity Plan or any award thereunder or if the participant breaches any agreement with our company with respect to non-competition, non-solicitation or confidentiality. Our Compensation Committee also may recover any award or payments or gain in respect of any award under the Amended Equity Plan in accordance with our recoupment policy or as otherwise required by applicable law or applicable stock exchange listing standards.
Certain Transactions; Certain Adjustments
In the event of a consolidation, merger or similar transaction, or series of related transactions, including a sale or other disposition of shares of our Common Stock, in which the Company is not the surviving corporation or that results in the acquisition of all or substantially all of our then outstanding shares of our Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, a sale of all or substantially all of our assets or our dissolution or liquidation, our Compensation Committee may, among other things, provide for the assumption or continuation of outstanding awards, for new grants in substitution of outstanding awards, for a cash-out of outstanding awards, or for the accelerated vesting or delivery of shares under awards, in each case on such terms and with such restrictions as it deems appropriate. Except as our Compensation Committee may otherwise determine, awards (other than outstanding shares of restricted stock) not assumed in connection with such a transaction will terminate automatically. In the case of outstanding restricted stock that does not vest in connection with a corporate transaction, our Compensation Committee may require that any amounts payable in respect of such restricted stock be placed in escrow or otherwise made subject to such restrictions as our Compensation Committee deems appropriate to carry out the intent of the Amended Equity Plan.
In the event of a stock dividend, stock split or combination of shares (including a reverse stock split), recapitalization, or other change in our capital structure that constitutes an equity restructuring within the meaning of FASB ASC 718, our Compensation Committee will make appropriate adjustments to the Share Pool, the share counting rules, the maximum number of shares of our Common Stock that may be delivered under ISOs, and individual and non-employee director award limits included in the Amended Equity Plan, and will also
 
make appropriate adjustments to the number and kind of shares or securities subject to awards, the exercise prices (or base values) of such awards or any other terms of awards affected by such change. Our Compensation Committee will also make the types of adjustments described above to take into account distributions and other events other than those listed above if it determines that such adjustments are appropriate to avoid distortion in the operation of the Amended Equity Plan.
Prohibition on Repricing
Except in connection with certain corporate transactions involving the Company, the Company may not, without obtaining stockholder approval, amend the terms of outstanding stock options or SARs to reduce the exercise price or base value of such awards, cancel outstanding stock options or SARs in exchange for stock options or SARs with an exercise price or base value that is less than the exercise price or base value applicable to the original award, or cancel outstanding stock options or SARs that have an exercise price or base value greater than the fair market value of a share of our Common Stock on the date of such cancellation in exchange for cash or other consideration.
Amendment; Termination
Our Compensation Committee will be able to amend the Amended Equity Plan or outstanding awards, or terminate the Amended Equity Plan as to future grants of awards, except that our Compensation Committee will not be able to alter the terms of a participant’s award without the participant’s consent if it would affect materially and adversely the participant’s rights under the award (unless expressly provided in the Amended Equity Plan or the right to alter the terms of an award was expressly reserved by our Compensation Committee at the time the award was granted). Stockholder approval will be required for any amendment to the Amended Equity Plan to the extent such approval is required by law, including the Code and applicable stock exchange requirements.
Federal Income Tax Consequences
The following is a summary of some of the material federal income tax consequences associated with the grant and exercise of awards under the Amended Equity Plan under current federal tax laws and certain other tax considerations associated with awards under the Amended Equity Plan. The summary does not address tax rates or non-U.S., state or local tax consequences, nor does it address employment-tax or other federal tax consequences except as noted.


2015 Proxy Statement | 24

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

Restricted Stock
A participant who is awarded or purchases shares subject to a substantial risk of forfeiture generally does not have income until the risk of forfeiture lapses. When the risk of forfeiture lapses, the participant has ordinary income equal to the excess of the fair market value of the shares at that time over the purchase price, if any, and a corresponding deduction is generally available to the Company. However, a participant may make an election under Section 83(b) of the Code to be taxed on restricted stock when it is acquired rather than later, when the substantial risk of forfeiture lapses. An 83(b) election must be made not later than thirty (30) days after the transfer of the shares to the participant and must satisfy certain other requirements. A participant who makes an effective 83(b) election will realize ordinary income equal to the fair market value of the shares as of the time of acquisition less any price paid for the shares. A corresponding deduction will generally be available to the Company. Fair market value for this purpose is determined without regard to the forfeiture restrictions. If a participant makes an effective 83(b) election, no additional income results by reason of the lapsing of the restrictions.
For purposes of determining capital gain or loss on a sale of shares awarded under the Amended Equity Plan, the holding period in the shares begins when the participant realizes taxable income with respect to the transfer. The participant’s tax basis in the shares equals the amount paid for the shares plus any income realized with respect to the transfer. However, if a participant makes an effective 83(b) election and later forfeits the shares, the tax loss realized as a result of the forfeiture is limited to the excess of what the participant paid for the shares (if anything) over the amount (if any) realized in connection with the forfeiture.
ISOs
In general, a participant realizes no taxable income upon the grant or exercise of an ISO. However, the exercise of an ISO may result in an alternative minimum tax liability to the participant. With some exceptions, a disposition of shares purchased under an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the participant (and generally a deduction to the Company) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized on the disposition is treated as a capital gain, for which the Company is not entitled to a deduction. If the participant does not dispose of the shares until after the expiration of these one and two-year holding periods, any gain or
 
loss recognized upon a subsequent sale is treated as a long-term capital gain or loss, for which the Company is not entitled to a deduction.
Non-statutory options
In general, a participant has no taxable income upon the grant of a non-statutory option but realizes income in connection with exercise of the option in an amount equal to the excess (at time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price. A corresponding deduction is generally available to the Company. Upon a subsequent sale or exchange of the shares, any recognized gain or loss is treated as a capital gain or loss for which the Company is not entitled to a deduction. An ISO that is exercised more than three months after termination of employment (other than termination by reason of death) is generally treated as a non-statutory option. ISOs are also treated as non-statutory options to the extent they first become exercisable by an individual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000.
SARs
In general, a participant has no taxable income upon the grant of a SAR, but realizes income in connection with exercise of the SAR (whether for cash or shares) in an amount equal to the amount of any cash and the fair market value of any stock received. A corresponding deduction is generally available to the Company.
Restricted Stock Units
The grant of a restricted stock unit does not itself generally result in taxable income. Instead, the participant is taxed upon vesting (and a corresponding deduction is generally available to the Company), unless he or she has made a proper election to defer receipt of the shares (or cash if the award is cash-settled) under Section 409A of the Code. If the shares delivered are restricted for tax purposes, the participant will be subject to the rules described above for restricted stock.
Section 162(m)
Stock options, SARs and certain performance awards under the Amended Equity Plan are generally intended to be exempt or eligible for exemption from the deductibility limits of Section 162(m). However, as discussed above in “Reasons for Seeking Stockholder Approval,” the Compensation Committee will have discretionary authority to provide compensation that is not exempt from the limits on deductibility under Section 162(m).


25 | 2015 Proxy Statement

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

Section 409A
Section 409A of the Code imposes an additional 20% income tax, plus, in some cases, a further income tax in the nature of interest, on nonqualified deferred compensation that does not comply with deferral, payment-timing, and other formal and operational requirements specified in Section 409A and related regulations and that is not exempt from those requirements. Stock options and SARs granted under the Amended Equity Plan are intended to be exempt from Section 409A of the Code. The Amended Equity Plan gives the Compensation Committee the flexibility to prescribe terms for other awards that are consistent with the requirements of, or an exemption from, Section 409A of the Code.
 
Certain Change of Control Payments
Under Section 280G of the Code, the vesting or accelerated exercisability of stock options or the vesting and payment of other awards in connection with a change of control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments contingent on the change in control in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting, or exercise of awards, may be subject to an additional 20% federal tax and may be non-deductible to the Company.

Equity Compensation Plan Information
The following table provides information as of December 31, 2014 about the securities authorized for issuance under the 2010 Plan, the Prior Plans, and the Company's 2012 Employee Stock Purchase Plan (the “ESPP”), each of which was approved by stockholders, as well as the Company's Financial Institution Incentive Plan (the “Financial Institution Plan”), which was not approved by stockholders. As of the adoption of the 2010 Plan, which occurred shortly prior to our initial public offering, we stopped granting awards under all Prior Plans as well as the Financial Institution Plan.
Plan category
Number of securities to be issued upon
(i) exercise of outstanding options, warrants, and rights and (ii) vesting of RSUs
 
Weighted-average exercise price of outstanding options, warrants, and rights
 
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
 
(a)
 
(b)
 
(c)
Equity compensation plans approved by security holders
6,802,722

 
 
$
31.64

(1)
 
7,243,267

(2)(3)
Equity compensation plans not approved by security holders
31,413

(4)
 
$
22.45

 
 

 
Total
6,834,135

 
 
$
31.59

 
 
7,243,267

 
 
 
 
 
 
 
 
 
 
(1)
Amount is based on the weighted-average exercise price of vested and unvested stock options outstanding under the 2010   Plan and the Prior Plans. RSUs, which have no exercise price, are excluded from this calculation.
(2)
Consists of 6,318,795 shares available for future issuance under the 2010 Plan and 924,472 shares available for future issuance under the ESPP, including 14,740 shares subject to purchase at the conclusion of the current ESPP purchase period.
(3)
In addition to being available for future issuance upon the exercise of stock options, warrants, or other rights that may be granted after December 31, 2014, 6,318,795 shares under the 2010 Plan may instead be issued in the form of restricted stock, unrestricted stock, RSUs, stock units, performance awards, or other equity-based awards.
(4)
Consists of vested and unvested warrants under the Financial Institution Plan.
As of December 31, 2014, there were an aggregate of 6,834,135 shares subject to issuance upon (i) the exercise of outstanding vested and unvested stock options under the 2010 Plan and the Prior Plans, at a weighted-average exercise price of $31.59 per share and a weighted-average remaining contractual term of 6.38 years and (ii) the vesting of RSUs under the 2010 Plan. As of December 31, 2014, 546,725 shares were subject to outstanding RSUs that had not yet vested, and 33,634 shares were subject to outstanding restricted stock awards that had not yet vested.

2015 Proxy Statement | 26

Proposal 2: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. 2010 Omnibus Equity Incentive Plan

New Plan Benefits
The Board has not granted any awards under the Amended Equity Plan subject to stockholder approval of this Proposal 2. The Compensation Committee has full discretion (and, if delegated by the Board, as described above under "Summary of the Amended Equity Plan Administration," such other committee of the Board has discretion to the extent of such delegation) to determine the shares subject to awards to be granted to participants under the Amended Equity Plan, subject to the limits described above under "Summary of the Amended Equity Plan Individual and Non-Employee Director Limits." As a
 
result, future benefits or amounts that would be received under the Amended Equity Plan are not determinable at this time. The closing price per share of our Common Stock on March 4, 2015 was $45.18.
Required Vote
Approval of the Amended Equity Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock cast affirmatively or negatively in person or by proxy. Abstentions and broker non-votes will not be counted as shares voting on such matter and accordingly will have no effect on the approval of this Proposal 2.


THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.



27 | 2015 Proxy Statement

Proposal 3: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. Corporate Executive Bonus Plan


Proposal 3: Approval of the Amendment and Restatement of the LPL Financial Holdings Inc. Corporate Executive Bonus Plan
At the Annual Meeting, stockholders will be asked to approve the amendment and restatement of the LPL Financial Holdings Inc. Corporate Executive Bonus Plan (the "Bonus Plan" and as amended, the “Amended Bonus Plan”). Performance-based compensation is a key element of our compensation program. Our executive officers are eligible for performance-based cash incentive awards, which are designed to incentivize our executive officers to work toward the achievement of key Company objectives. Awards under the Amended Bonus Plan are intended to motivate participating executives to achieve pre-established corporate performance goals that are critical to our business. Prior to its amendment and restatement, performance-based cash incentive awards were granted to our executive officers under the Bonus Plan, which was adopted by our Board of Directors on March 15, 2010 and approved by stockholders on June 9, 2010. The Amended Bonus Plan was adopted by the Board, acting on the recommendation of our Compensation Committee, on March 3, 2015 and will become effective upon receiving stockholder approval at the Annual Meeting.
Stockholder approval of the Amended Bonus Plan would preserve our Compensation Committee’s ability to grant cash incentive awards that may qualify as performance-based compensation under Section 162(m). As discussed in more detail below under "Summary of the Amended Bonus Plan — Participants; Individual Limit" , to enable the Company to provide fair and competitive compensation to our executive officers, relative to our peers, the Board has increased the applicable Section 162(m) limit on awards granted to participants in any year under the Amended Bonus Plan from the applicable limit under the Bonus Plan prior to its amendment and restatement.
Although stockholder approval is one of the requirements for exemption under Section 162(m), even with stockholder approval, our Board and Compensation Committee cannot guarantee that compensation intended to be exempt performance-based compensation under Section 162(m) will be treated as such. In addition, as discussed below in "Compensation Discussion and Analysis" , our Compensation Committee has and will continue to have authority to award or approve compensation that is not deductible under Section 162(m) in order to provide competitive levels of total compensation for our executive officers in a manner designed to incentivize achievement of our strategic goals and objectives.
 
If stockholders do not approve this Proposal 3, we will not have the ability to make annual cash bonus awards that qualify as performance-based compensation under Section 162(m); accordingly, a portion of compensation payable under such programs may not be deductible for federal income tax purposes, which would result in an increase in our income tax expenses.
Summary of the Amended Bonus Plan
A copy of the Amended Bonus Plan is attached as Appendix B to this proxy statement. The following description of certain features of the Amended Bonus Plan is qualified in its entirety by reference to the full text of the plan, which we encourage stockholders to read in its entirety.
Administration
The Amended Bonus Plan will be administered by our Compensation Committee or a subcommittee thereof. Our Compensation Committee has authority to interpret the Amended Bonus Plan, to determine eligibility for awards under the plan, to determine the terms and conditions applicable to any award under the plan, to establish rules and regulations to implement the plan and to take all actions and make all determinations necessary to administer the plan. Any interpretation or decision by our Compensation Committee will be final and binding on all parties who have an interest in the Amended Bonus Plan.
Participants; Individual Limit
Awards under the Amended Bonus Plan may be granted by our Compensation Committee to any of our executive officers. As of March 27, 2015 , we had 14 executive officers.
The maximum payment to any participant pursuant to an award under the Amended Bonus Plan in any fiscal year will in no event exceed $10,000,000. For the reasons described above, this limit has been increased from the $5,000,000 maximum amount payable pursuant to awards under the Bonus Plan prior to its amendment and restatement.
Awards
With respect to each award granted under the Amended Bonus Plan, our Compensation Committee will establish the performance criteria applicable to the award, the performance period to which it relates, the target amount applicable to the award, the formula used to determine the amount or amounts payable if the performance criteria are achieved, and


2015 Proxy Statement | 28

Proposal 3: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. Corporate Executive Bonus Plan


all other terms and conditions as our Compensation Committee deems appropriate. Awards under the Amended Bonus Plan are intended to qualify as exempt performance-based compensation under Section 162(m), to the extent applicable. Such awards and the Amended Bonus Plan will be administered in accordance with the requirements of Section 162(m), to the extent applicable.
Performance Criteria
Awards under the Amended Bonus Plan will be made based on, and subject to achieving, performance criteria established by our Compensation Committee, which may be different for each participant and which may be measured solely on a corporate, subsidiary, enterprise or business unit basis, or a combination thereof. Performance criteria under the Amended Bonus Plan are limited to an objectively determinable measure or measures of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project, or geographical basis or in combinations thereof): sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, amortization, or equity expense, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital, capital employed, or assets; one or more operating ratios, including ratios that measure operating income or profit, including on an after-tax basis; one or more relative measures of revenues and earnings, including “gearing” measures based on revenues or earnings, in each case before or after deduction of any portion of revenues or earnings; pre-tax net income; after-tax net income; operating revenue growth; borrowing levels, leverage ratios, or credit rating; market share; capital expenditures; cash flow; stock price; earnings per share, stockholder return or value; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin-offs, split-ups and the like; reorganizations; recapitalizations, restructurings, financings (issuance of debt or equity), or refinancings; increase in assets under management, administration, or custody; changes between years or periods that are determined with respect to any of the foregoing; and any derivations of any of the foregoing. A performance criterion and any applicable targets need not be based upon an increase, a positive or improved result, or avoidance of loss.
 
To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m) (to the extent applicable), our Compensation Committee may provide that one or more of the performance criteria applicable to any award under the Amended Bonus Plan will be adjusted in an objectively determinable manner to reflect events occurring during the performance period that affect the applicable performance criterion or criteria. The formula for any award under the Amended Bonus Plan may include or exclude items to measure specific objectives, such as losses from discontinued operations, extraordinary gains or losses, the cumulative effect of accounting changes, acquisitions or divestitures, foreign exchange impacts, and any unusual, nonrecurring gain or loss, and will be based on accounting rules and related Company accounting policies and practices in effect on the date the formula is approved by our Compensation Committee.
Payment under an Award
Following the close of the performance period, our Compensation Committee will determine (and, to the extent required by Section 162(m), to the extent applicable, certify) whether and to what extent the applicable performance criteria have been satisfied. Our Compensation Committee will then determine the actual payment, if any, under each award. A participant will be entitled to payment under an award only if all conditions to payment have been satisfied in accordance with the Amended Bonus Plan and the terms of the award and the participant is an employee of the Company on the last day of the applicable performance period, with certain exceptions in the case of retirement, death or disability. Payment of awards under the Amended Bonus Plan will be made within 75 days after the close of the performance period. Our Compensation Committee has the sole discretion to reduce the actual payment to be made under any award.
In the event of a participant’s retirement, death, or disability before the last day of an applicable performance period, our Compensation Committee will have the sole discretion to award any bonus to such participant under the Amended Bonus Plan. If a participant is on a leave of absence for any portion of the relevant performance period, the bonus to be awarded under the Amended Bonus Plan may be prorated to reflect only the time when the participant was actively employed and not any leave period.


29 | 2015 Proxy Statement

Proposal 3: Approval of the Amendment and Restatement of the
LPL Financial Holdings Inc. Corporate Executive Bonus Plan


Recovery of Compensation
Awards under the Amended Bonus Plan will be subject to forfeiture, termination and rescission, and a participant who receives a payment pursuant to the Amended Bonus Plan will be obligated to return such payment to us, to the extent provided by our Compensation Committee, in connection with a breach by the participant of an award agreement under the plan or any non-competition, non-solicitation, confidentiality, or similar covenant or agreement with our Company or an overpayment of incentive compensation due to inaccurate financial data, in accordance with the Company’s recoupment policy or as otherwise required by law or applicable stock exchange listing standards.
Termination
Our Compensation Committee may terminate the Amended Bonus Plan at any time.
 
New Plan Benefits
The Board has not granted any awards under the Amended Bonus Plan subject to stockholder approval of this Proposal 3. Our Compensation Committee has full discretion to determine the amount of the awards to be made to participants under the Amended Bonus Plan, subject to the limits described above under "Summary of the Amended Bonus Plan — Participants; Individual Limit" .
Required Vote
Approval of the Amended Bonus Plan requires the affirmative vote of the holders of a majority of the shares of Common Stock cast affirmatively or negatively in person or by proxy. Abstentions and broker non-votes will not be counted as shares voting on such matter and accordingly will have no effect on the approval of this Proposal 3.


THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

2015 Proxy Statement | 30

Compensation Discussion and Analysis


Compensation Discussion and Analysis
Executive Summary
This Compensation Discussion and Analysis ("CD&A") describes the actions taken by our Compensation Committee with respect to the 2014 compensation for our executive officers, including our named executive officers ("NEOs"). Under SEC rules, our NEOs for 2014 are:
Executive
Title
Mark S. Casady
Chair of the Board, Chief Executive Officer
Dan H. Arnold
President, former Chief Financial Officer
David P. Bergers
Managing Director, Legal & Government Relations and General Counsel
Robert J. Moore
Former President
Michelle B. Oroschakoff
Managing Director, Chief Risk Officer
2014 Performance
In 2014 we had a strong year of growing our core business, but our adjusted earnings per share remained flat. In our core business, we achieved record assets, revenues, and gross profit driven by strong recruiting, advisor productivity, and equity market growth. Additionally, expense management and ongoing share repurchases improved our earnings per share. However, these improvements were offset by two major challenges: a decline in revenue derived from our cash sweep programs, in which we earn fees based on cash balances for assisting our advisors in managing their clients' accounts, and charges related to regulatory matters. From an operational standpoint, we remained focused on transforming our business to enhance our value proposition, strengthening our risk and compliance capabilities, and growing our market share. For additional discussion and analysis of the Company's 2014 performance, please refer to the Annual Report. After taking into account these overall results, the Compensation Committee determined that the 2014 bonus pool would be funded, but that annual cash bonus awards to our NEOs (as well to our other executives and employees) would be paid at below-target levels. This approach is consistent with our compensation philosophy and past practices.
Net revenue increased 6% year-over-year and grew to a record $4.4 billion in 2014. Our revenue growth was driven by an increase in total advisors and advisory productivity, as well as by market appreciation.
 

31 | 2015 Proxy Statement

Compensation Discussion and Analysis


Our results were further aided by our continued success in retaining and recruiting advisors. We believe our 97% annualized retention rate for commission and advisory revenues continued to lead the industry in 2014. Despite a slow start in advisor recruiting, we finished strong in 2014, adding 363 net new advisors, putting us once again among the top firms in the industry in terms of attracting new advisors. These metrics are strong indicators of our leadership in the market place and the continuing appeal of the independent model, in which financial advisors operate as independent contractors rather than as employees.
 
In 2014 we had another strong year accumulating brokerage and advisory assets, which grew 8% to $475 billion, including a record $18 billion in net new advisory assets. Our brokerage and advisory asset growth was driven by the strong advisor recruiting discussed above, solid advisor productivity, and equity market growth.
 
A 6% increase in gross profit, a decline in our cash sweep revenue, and charges related to regulatory matters translated to a 1% increase in 2014 in adjusted EBITDA, which is a non-GAAP financial measure.
 

2015 Proxy Statement | 32

Compensation Discussion and Analysis


Adjusted earnings per share remained flat at $2.44, which we believe does not fully reflect the success we had in growing our core business. We increased brokerage and advisory assets, revenues, and gross profits, managed expenses, and continued repurchasing shares to generate $0.33 in incremental earnings per share. However, this growth was offset by two challenges: the decline in cash sweep revenue and charges related to regulatory matters. Adjusted earnings and adjusted earnings per share are non-GAAP financial measures.
 
Capital is returned to stockholders through our share repurchase program and dividends. In 2014, we demonstrated our commitment to returning capital to stockholders, deploying $371 million in capital to share repurchases and dividends, equating to $3.65 per share. In 2012, we paid a special dividend of $223 million, equating to $2.00 per share.
 

Non-GAAP Financial Measures
Adjusted earnings represent net income before: (a) employee share-based compensation expense, (b) amortization of intangible assets, (c) acquisition and integration related expenses, (d) restructuring and conversion costs, (e) debt amendment and extinguishment costs, and (f) other. Reconciling items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts. Adjusted earnings per share represents adjusted earnings divided by weighted-average outstanding shares on a fully diluted basis. The Company prepares adjusted earnings and adjusted earnings per share to eliminate the effects of items that it does not consider indicative of its core operating performance. The Company believes these measures provide investors with greater transparency by helping illustrate the underlying financial and business trends relating to results of operations and financial condition and comparability between current and prior periods.
Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization), further adjusted to exclude certain non-cash charges and other adjustments. The Company presents adjusted EBITDA because the Company considers it a useful financial metric in assessing the Company's operating performance from period to period by excluding certain items that the Company believes are not representative of its core business, such as certain material non-cash items and other adjustments that are outside the control of management.
Adjusted earnings, adjusted earnings per share, and adjusted EBITDA are not measures of the Company's financial performance under GAAP and should not be considered as an alternative to net income or earnings per share or any other performance measure derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of profitability or liquidity. In addition, adjusted EBITDA can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, and capital investments.
You can find additional related information, including a reconciliation of such non-GAAP measures for the years ended December   31, 2014, 2013, and 2012, within our Annual Report, under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations How We Evaluate Our Business."

33 | 2015 Proxy Statement

Compensation Discussion and Analysis


 
 
 
 
 
Compensation Philosophy
 
 
Under the oversight of our Compensation Committee, our executive compensation program rewards sustained financial and operating performance. Our compensation program is designed to incentivize strong performance by linking executives’ compensation to the success of the Company and avoiding practices that may create unwarranted risk.
The design and operation of our program reflect the following objectives:
 
 
n
aligning the interests of our executive officers with the interests of our Company and its stockholders;
 
 
n
linking our executive officers' compensation to the achievement of both short-term and long-term strategic and operational goals; and
 
 
n
attracting, motivating, and retaining highly qualified executive officers who are passionate about the mission of our Company.
 
 
We seek to achieve these objectives through the following guiding compensation principles:
 
 
n
paying compensation that is competitive with that offered for similar positions with our peer companies;
 
 
n
striking a balance between current versus long-term compensation and cash versus equity compensation;
 
 
n
linking short-term and long-term incentive compensation largely to objective and, to the extent possible, quantifiable performance measures; and
 
 
n
using equity-based compensation for a significant portion of pay.
 
 
 
 
 
 
 
 
 
 
Compensation Governance
 
 
In order to promote strong governance and alignment with stockholder interests, we do  the following:
 
 
ü
b enchmark executive compensation against peers with which we compete for talent;
 
 
ü
maintain a pay mix that is very heavily performance-based;
 
 
ü
maintain stock ownership guidelines for executives;
 
 
ü
maintain a compensation recoupment policy in the event of a restatement of our financial statements;
 
 
ü
retain an independent compensation consultant engaged by, and reporting directly to, the Compensation Committee;
 
 
ü
conduct annual risk assessments of our executive compensation policies and practices; and
 
 
ü
hold Compensati on Committee executive sessions without management present.
 
 
In addition, we do not  do the following:
 
 
û
re-price stock options without stockholder approval;
 
 
û
permit hedging transactions or short sales by executives;
 
 
û
permit pledging or holding company stock in a margin account by executives;
 
 
û
enter into individual employment agreements; or
 
 
û
provide excise tax gross-ups to executives .
 
 
 
 
 

In 2014, we made changes to our compensation practices to bring them into greater alignment with our peer companies, provide greater transparency for our employees and investors, and create consistency in how compensation is determined across our
 
organization. These additional changes are discussed below under “ —How Compensation Decisions Were Made — Compensation Program Developments in 2014 .”


2015 Proxy Statement | 34

Compensation Discussion and Analysis


Components of Compensation
The core components of our executive compensation program are:
Base salary;
Annual cash bonus awards;
Long-term equity incentive awards; and
Severance and change-in-control benefits.
Our Compensation Committee retains flexibility to determine the appropriate level and mix of the various compensation components consistent with our business needs. The mix of compensation elements is intended to provide our NEOs with a competitive total pay package that rewards recent results and drives long-term corporate performance. The cash bonus awards compensate NEOs based upon annual Company and individual performance. We also have a long-term equity incentive program designed to provide equity compensation primarily linked to longer-term Company performance while aligning the interests of our executives with the interests of our stockholders.
Average NEO Compensation Mix
Base Salary
We pay our NEOs base salaries in order to provide a stable income that is commensurate with their experience and responsibilities, and reflects competitive market conditions. The base salaries of the NEOs are set based on the responsibilities of the individual, taking into account the individual's skills, experience, prior compensation levels, and market compensation for our peer group. We review base salaries for our NEOs annually, although salary changes may not occur with that frequency. Rather, base salaries are increased when individual performance, job scope, or market compensation data indicate that an increase is warranted.
The 2014 base salaries of Messrs. Moore and Bergers, and Ms. Oroschakoff were unchanged from 2013. In determining that the salaries remained appropriate, the Compensation Committee considered, among other things, that Mr. Bergers and
 
Ms. Oroschakoff joined the Company in August 2013 and September 2013, respectively, and the overall compensation mix of Mr. Moore, particularly in the context of his performance-based compensation targets. In 2014 , the Compensation Committee provided Mr. Casady with a merit-based increase in base salary from $800,000 to $900,000 effective as of February 23, 2014. Additionally, Mr. Arnold received a merit-based increase in base salary from $500,000 to $550,000, effective as of February 23, 2014. In determining that these increases were appropriate, the Compensation Committee considered, among other things, base salary levels for chief executive officers and chief financial officers of industry peers. The 2014 salaries for all of our named executive officers appear in the Summary Compensation Table that follows this CD&A.
Annual Cash Bonus Awards
We provide annual cash bonus awards in order to tie a significant portion of the overall cash compensation of each NEO to annually-established, key short-term corporate objectives and stated financial goals of the Company and to incentivize the achievement of those goals as well as individual performance goals. See “ —Goals, Objectives and Performance Evaluation .” The Compensation Committee believes that the NEOs, as key members of the Company’s leadership team, share responsibility for supporting the goals and performance of the Company.
At the beginning of each year, t he Compensation Committee establishes an objective corporate performance goal (the achievement of which is a condition to the funding of the bonus pool, and the payment of any cash bonus awards, under the Bonus Plan), each NEO’s target and maximum award amounts and additional corporate and individual performance goals on which actual payment of annual cash bonus awards, if any, will be based. Each NEO’s individual target award amount is set by the Compensation Committee by reference to market compensation for comparable positions within our peer group as well as the nature of the NEO's role and responsibilities. By emphasizing executives’ contributions to the Company’s overall performance rather than focusing only on their individual business or function, we believe that these cash bonuses provide a significant incentive to our NEOs to work towards achieving our overall Company objectives.
If the Compensation Committee determines that the threshold corporate performance goal has been achieved and therefore a bonus pool under the Bonus Plan will be funded, the Compensation Committee then evaluates the Company’s and each NEO’s performance against the additional, previously


35 | 2015 Proxy Statement

Compensation Discussion and Analysis


established goals, taking into account discussions with management and the Compensation Consultant, and determines whether and to what extent the bonuses are paid. See " —Goals, Objectives and Performance Evaluation ." Our Compensation Committee has the discretion, subject to the terms of the various bonus awards, to pay bonuses above and below the established targets based upon their assessment of our performance, each NEO's performance, and other considerations.
For 2014 , cash bonuses were awarded to our NEOs under our Bonus Plan, and the objective performance goal set by the Compensation Committee to determine whether the annual bonus pool under the Bonus Plan would be funded was based on the Company’s adjusted EBITDA. In general, cash bonuses paid under the Bonus Plan are intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code.
 
Our chief executive officer and chief financial officer met with the Compensation Committee in December  2014 and January 2015 to discuss our actual performance compared to our pre-established 2014 corporate objectives. The Compensation Committee determined that the Company’s adjusted EBITDA was sufficient to fund a cash bonus pool, but that overall corporate performance only partially satisfied the additional corporate objectives to which the awards were subject, as further described below under "   Goals, Objectives and Performance Evaluation ." Based on this assessment of the Company's performance, the Compensation Committee exercised negative discretion to award annual cash bonuses under the Bonus Plan to our NEOs below each executive’s target award amount for 2014 , with the exception of Mr. Bergers who received a target bonus under the terms of his 2013 offer letter.

The table below includes the target annual cash bonus award established for each of our NEOs at the beginning of 2014 , as well as the actual cash bonus awarded to each of our NEOs for 2014, as determined by the Compensation Committee:
NEO
Target Award
 
Target Award as a Percentage of Base Salary
 
Cash Bonus Awarded
 
Cash Bonus Awarded as a Percentage of Target Award
Mark S. Casady
$
2,475,000

 
275%
 
$
1,485,000

 
60%
Dan H. Arnold
$
825,000

 
150%
 
$
536,250

 
65%
David P. Bergers (1)
$
900,000

 
150%
 
$
900,000

 
100%
Robert J. Moore
$
1,100,000

 
176%
 
$
715,000

 
65%
Michelle B. Oroschakoff
$
525,000

 
150%
 
$
395,000

 
75%
(1)
Mr. Bergers received a target bonus under the terms of his 2013 offer letter.

Annual Cash Bonus Awards
($ in thousands)
 



2015 Proxy Statement | 36

Compensation Discussion and Analysis


In determining these bonus payments, the Compensation Committee reviewed overall corporate performance as well as each individual's contribution to the Company's 2014 results. In particular, for Messrs. Casady, Arnold, and Moore, the Compensation Committee considered the Company's lagging earnings results in establishing their below target bonus amount. Mr. Bergers received an award at target per the terms of his 2013 offer letter, as noted in the footnote to the table above. Ms. Oroschakoff received a bonus award that reflected the Company's overall performance but also the substantial progress that we believe that we made in 2014 in strengthening our risk and compliance capabilities.
Long-Term Equity Incentive Awards
The purpose of our long-term equity incentive program is to promote achievement of corporate goals that drive long-term stockholder value and retain key executives. We provide stock-based, long-term compensation to our NEOs through equity awards under our stockholder-approved equity plans. Based upon an assessment of peer practices and discussion with the Compensation Consultant, our long-term equity incentive awards include RSUs in addition to stock options. This blended approach is intended to focus executives on stock appreciation on both an absolute and relative basis, while enhancing executive retention. Unvested stock options and
 
RSUs generally are forfeited if the named executive officer voluntarily leaves the Company other than upon retirement. We believe that our long-term equity incentive program is critical to our efforts to hire and retain the best talent in the financial services industry.
The Compensation Committee assesses long-term equity incentive targets for all eligible executives annually after reviewing the recommendations of management and the information provided by the independent Compensation Consultant. Target award amounts are based on executive position, including job scope and base salary, after consideration of our peer group targets and prior years’ awards. For our NEOs, the targets established by our Compensation Committee for 2014 ranged from 83% of base salary to 350% of base salary.
To determine the actual annual long-term incentive ("LTI") awards made to our NEOs, the Compensation Committee considers the target award amount previously set based on a NEO’s role and individual performance and leadership potential. Based upon such considerations, a NEO's ultimate annual long-term equity award can vary from the target amount for a particular role. Generally, actual awards range from 90-110% of target, although awards may fall outside of this range, based on the Compensation Committee's assessment of the individual.

The table below reflects the target LTI award established for each of our NEOs for 2014 , as well as the actual LTI award granted to our NEOs for 2014 performance, as determined by the Compensation Committee:
Executive
 
2014 Annual Base Salary
 
LTI Target % of Base Salary
 
LTI Target $
 
LTI $
Granted (1)
Mark S. Casady
 
$
900,000

 
350%
 
$
3,150,000

 
$
6,072,000

Dan H. Arnold
 
$
550,000

 
100%
 
$
550,000

 
$
550,000

David P. Bergers
 
$
600,000

 
83%
 
$
500,000

 
$
500,000

Robert J. Moore (2)
 
$
625,000

 
250%
 
$
1,562,500

 
$

Michelle B. Oroschakoff
 
$
350,000

 
100%
 
$
350,000

 
$
350,000

(1)
These LTI awards were granted on March 6, 2015 for services provided in fiscal year 2014 . Mr. Casady received 100% of his award as a stock option award that is scheduled to vest ratably over a three-year period. The remaining NEOs received 70% of their awards as stock option awards and 30% of their awards as RSUs, all scheduled to vest ratably over a three-year period. In calculating the number of stock options awarded, we divide the dollar amount of the LTI grant that is allocated to stock options by one-third of the closing price of our Common Stock on the date of grant. The exercise price of any such option is equal to the closing price of our Common Stock on the date of grant. In calculating the number of RSUs awarded, we divide the dollar amount of the LTI grant that is allocated to RSUs, if any, by the closing price of our Common Stock on the date of grant.
(2)
Mr. Moore voluntarily terminated his employment with us effective as of March 13, 2015 and, accordingly, did not receive an LTI grant for 2014.

37 | 2015 Proxy Statement

Compensation Discussion and Analysis


Long-Term Incentive Awards
($ in thousands)
Mr. Casady’s target total compensation consists of base salary, target bonus, and LTI value. In determining Mr. Casady’s LTI award for 2014, the Compensation Committee conducted a two-step analysis, first benchmarking Mr. Casady’s target total compensation against the Company’s peer group and then determining to increase the equity component, rather than the cash component, of his total compensation for 2014. With the assistance of the Compensation Consultant, the Compensation Committee assessed Mr. Casady’s target total compensation and determined that such compensation was below market median, particularly with regard to LTI. The Compensation Committee determined that an increase in Mr. Casady's target total compensation was appropriate in light of his role, experience, and tenure with the Company, as well as the desirability of his skill set. The Compensation Committee sought to reinforce the alignment of Mr. Casady’s compensation with stockholder value creation over the long-term and to further strengthen the retention elements of Mr. Casady’s pay, particularly following the termination of his employment agreement in February 2014. Consistent with these objectives, the Compensation Committee determined to increase the equity component of Mr. Casady’s total compensation, rather than the cash component, and granted Mr. Casady an LTI award consisting solely of stock options that are scheduled to vest ratably over three years. Mr. Casady did not receive any RSUs.
Messrs. Arnold, Moore, Bergers, and Oroschakoff received awards primarily based on competitive market practices among the Company's peer group, as well as other factors such as retention, leadership potential, and individual performance.
 
In accordance with SEC rules, the equity awards shown in our Summary Compensation table and Grants of Plan-Based Awards table appearing elsewhere in this proxy statement reflect LTI awards that were granted during 2014 . The awards shown in such tables include the LTI awards granted in February 2014 for services performed in 2013 . The LTI awards described in the table above, which were made in March 2015 for services performed in 2014 , are not reflected in our Summary Compensation table or Grants of Plan-Based Awards table.
In addition to the annual long-term equity grants disclosed above, on March 6, 2015, Ms. Oroschakoff was granted supplemental LTI awards in the amount of $140,000, consisting of $98,000 in stock options and $42,000 in RSUs. These awards will vest in full on the third anniversary of the date of grant. The awards were intended to help retain Ms. Oroschakoff and further recognize her performance in 2014. Ms. Oroschakoff was also granted a special LTI award of 1,208 RSUs on November 1, 2014 in connection with her relocation to San Diego, California.
Each of Mr. Bergers and Ms. Oroschakoff also received LTI awards on the anniversary of their employment commencement date, under the terms of their respective 2013 offer letters. On August 5, 2014, Mr. Bergers was granted 5,375 RSUs and 15,039 stock options with an exercise price of $46.51 per share, the closing price of our Common Stock on the date of grant. On September 3, 2014, Ms.Oroschakoff was granted 23,179 stock options with an exercise price of $48.09 per share, the closing price of our Common Stock on the date of grant. Each of these LTI awards granted to Mr. Bergers and Ms. Oroschakoff, which are reflected in our Summary Compensation table and Grants of


2015 Proxy Statement | 38

Compensation Discussion and Analysis


Plan-Based Awards table, vest ratably over four years.
Additional Compensation Elements
Severance and Change-in-Control Benefits
We adopted the Executive Severance Plan in February 2014 to enable us to offer a form of protection to our executive officers in the event their employment with us is involuntarily terminated by the Company or is terminated for good reason by the executive (each, a “qualifying termination”). We believe that providing these benefits helps us compete for executive talent and may help us retain current key employees. All of our named executive officers are eligible for severance benefits under the Executive Severance Plan.
Other Compensation Components
401(k) Plan. We maintain a retirement savings plan, or a 401(k) Plan, for the benefit of all eligible employees, including our NEOs. Under the terms of the 401(k) Plan, employees may elect to make pre-tax 401(k) and Roth 401(k) contributions up to the statutorily prescribed limit. After one year of service, we match employee contributions on a pay period basis. For 2014 , we provided a “baseline” match in an amount equal to 55% of up to 8% of an employee's designated deferral of their eligible compensation, and we made an additional match equal to 10% of the first 8% of an employee's designated deferral of their eligible compensation. An employee's interests in his or her contributions are 100% vested when contributed. We provide this benefit to all of our eligible employees, and it is provided to our NEOs on the same basis as all other eligible employees.
For 2015 , we increased the amount by which we will match employee contributions to better align the Company's matching practices with market practices and to encourage employee participation in the 401   (k)   Plan. The Company will match employee contributions in an amount equal to 65% of up to 8%
 
of an employee’s designated 401(k) contribution, after such employee has completed one year of service. The additional 10% match on the first 8% of an employee's designated deferrals has been discontinued for 2015.
Nonqualified Deferred Compensation. Mr. Arnold, previously an executive of our wholly-owned indirect subsidiary, UVEST Financial Services Group, Inc. (“UVEST”), participates in the UVEST Executive Nonqualified “Excess” Plan (the “UVEST Plan”). The UVEST Plan allows certain highly compensated or management employees to defer up to 100% of their current compensation, which includes for this purpose base salary, service bonus, performance-based compensation, and commissions. Distributions of deferred amounts may be made only upon a qualifying distribution event, which, depending on the individual's election, may be a separation from service, disability (as defined in the UVEST Plan), death, a change-in-control event (as defined in the UVEST Plan), an unforeseeable emergency, or a specified date, or may be the earliest of one or more of these events. At the time an election is made to defer compensation under the UVEST Plan, participants may choose, with respect to each potential qualifying distribution event, to receive amounts in either a lump sum or in equal annual installments over a number of years (but not to exceed five years). Deferred amounts are credited with an investment return determined as if the amounts were invested in one or more investment funds made available by the UVEST Plan and selected by a participant. The UVEST Plan is intended to be a nonqualified deferred compensation plan operated in compliance with Section 409A of the Internal Revenue Code. The amounts of compensation Mr. Arnold elected to defer under the UVEST Plan in 2014 are described in the table below titled "Nonqualified Deferred Compensation for the Year Ended December 31, 2014 ."

Goals, Objectives, and Performance Evaluation
Our NEOs are primarily responsible for ensuring that the Company achieves our annual and long-term goals. At the beginning of 2014, our Compensation Committee established an objective corporate performance goal (the achievement of which is a condition to the funding of the bonus pool, and the payment of any cash bonus awards, under the Bonus Plan) based on the Company’s adjusted EBITDA and determined, with the input of the chief executive officer and the management team, the additional corporate goals and objectives for the upcoming year on which annual bonus awards would be based. In evaluating incentive compensation at the end of the year, our Compensation Committee considered the Company's financial results as well as qualitative factors, such as unplanned factors and "degree of difficulty," that were subjectively determined by the Compensation Committee in evaluating the Company's overall performance against all Company goals and objections. The Compensation Committee did not use any formal weightings in making its determinations, although adjusted EBITDA is the primary performance metric used to assess financial performance. The performance of the Company against these additional goals is assessed each year by our chief executive officer and chief financial officer, together with our

39 | 2015 Proxy Statement

Compensation Discussion and Analysis


Compensation Committee. Based on its assessment of the Company’s performance against these additional corporate goals, as well as its assessment of an NEO’s individual performance, the Compensation Committee exercises its discretion to grant annual cash bonus awards at, above, or below a NEO’s target award amount.
 
Goal
 
Performance
 
 
 
 
 
 
 
Delivering high-quality financial results, including achieving adjusted EBITDA of approximately $565 million and adjusted earnings of approximately $278 million.
 
The Company ended 2014 with adjusted EBITDA of $517 million, which was $48 million behind target, and adjusted earnings of $248 million, which was $30 million behind target. These unfavorable variances were driven largely by reduced cash sweep revenues, heightened regulatory expenses, and investments made in the Company's risk management capabilities.
 
 
 
 
 
 
 
Attracting and retaining advisors and financial institutions while driving customer engagement.
 
The Company achieved its business development targets for the full year and ended 2014 with 363 net new advisors. The Company's 97% annual production retention exceeded its retention target. The Company's 2014 performance with respect to this goal was strong.
 
 
 
 
 
 
 
Improving the Company's operating efficiency and scalability.
 
The Company achieved over $19 million in annualized savings through a combination of productivity and operational improvements as well as procurement savings. In particular, the Company made substantial progress in implementing its Service Value Commitment, an ongoing initiative to enhance the quality, speed, and cost of processes that support the Company's advisors and employees.
 
 
 
 
 
 
 
Building and promoting the Company's brand as an employer of choice.
 
The Company saw further improvement in employee engagement, as measured by a four-point increase in favorable responses to its annual employee engagement index, which is in addition to last year's 20-point improvement. The Company also made significant improvements in the area of talent management and redesigned its broad-based employee compensation and 401(k) programs.
 
 
 
 
 
 
 
Establishing a company-wide view of “service excellence” as being a key differentiator in the marketplace.
 
The Company implemented various enhancements to its infrastructure, training, and monitoring in order to improve its clients' experience. Among other things, the Company established a new Client Experience and Training team, established a 2014 service goal for every employee, and streamlined its process for handling client escalations and exceptions.
 
 
 
 
 
 
 
Improving the Company's risk profile and reputation.
 
The regulatory environment remains challenging for the Company and the industry in general. The Company continued to make progress in its regulatory remediation efforts and in implementing and expanding its key risk programs. The Company also continued to proactively engage with legislators, regulators, and industry trade organizations in its mission to strengthen relationships, convey the critical importance of independent financial advice, and explain the unique nature of its business model.
 
 
 
 
 
 
 
Delivering compelling innovative
technology solutions.

 
The Company developed and enhanced several technology solutions with a focus on simplicity and productivity, including introducing a new Resource Center, an information hub for the Company's financial advisors designed to provide them with easy access to insights and tools to effectively manage their businesses and support their clients. In addition, the Company delivered requested improvements to advisor tools that were designed to promote investor engagement and enhance office productivity. The Company also met internal targets for technology systems availability.
 
As we look forward to 2015 , the Compensation Committee has recommitted our management team to goals that are generally consistent with those adopted in 2014 .

2015 Proxy Statement | 40

Compensation Discussion and Analysis


How Compensation Decisions Were Made
Role of Compensation Committee
Our Compensation Committee is composed entirely of directors who meet the NASDAQ standards for independence, including the heightened standards applicable to Compensation Committee members. The Compensation Committee is responsible for establishing our human resources policies, including our compensation philosophy, and overseeing our executive compensation policies and program. Our Compensation Committee reviews and gives final approval of the total compensation payable to each of our named executive officers, as well as the structure and implementation of the Company's overall compensation programs. In establishing total target compensation levels for our NEOs, the Compensation Committee, with input from the Compensation Consultant, determines the ranges of market compensation that it believes will enable us to effectively compete for and retain high-performing, qualified executives. The Compensation Committee's charter sets forth the Compensation Committee's responsibilities.
Role of Executive Officers
At the beginning of each year, our executive officers develop the corporate goals and objectives that they believe should be achieved for the Company to be successful, which are reviewed with the Compensation Committee or the Board for the purpose of establishing how executive performance will be assessed. These objectives are derived largely from the Company’s annual financial and strategic planning sessions, and are prioritized and aligned with the Company’s long-term strategic plan. The objectives include both quantitative financial measurements and qualitative strategic and operational goals. The chief executive officer and the chief financial officer provide quarterly reports to the Compensation Committee assessing the Company’s performance against the corporate goals and objectives.
Our chief executive officer annually reviews the individual performance of each of his direct reports, including the NEOs (but excluding himself), and provides the Compensation Committee with evaluations of each such direct report as well as recommendations regarding such person's base salary level, annual cash bonus, and LTI award. Our chief human capital officer also attends Compensation Committee meetings and assists the Compensation Committee and the chief executive officer in recommending the final compensation levels for our named executive officers. Both the chief
 
executive officer and the chief human capital officer leave the meetings during discussions of compensation actions affecting them personally.
The Compensation Committee meets in executive session to independently determine the achievement of performance goals and decide the salary and incentive compensation for the chief executive officer, with input from the Compensation Consultant and the non-management directors, who also meet in executive session to consider the chief executive officer’s performance and compensation.
Role of Compensation Consultant
Our Compensation Committee has the authority to engage its own advisors to assist in carrying out its responsibilities. The Compensation Committee has engaged the Compensation Consultant to advise on compensation matters and provide experiential guidance on what is considered fair and competitive practice in the industry, primarily with respect to the compensation of the executive officers. In 2014 , the Compensation Consultant worked directly with the Compensation Committee and management to develop recommendations for compensation levels for our executive officers. In addition, the Compensation Consultant provided competitive compensation program and policy data as well as information concerning compensation plan design. Finally, the Compensation Consultant conducted a risk assessment of the Company’s executive compensation policies and practices.
The Compensation Committee has assessed the independence of the Compensation Consultant pursuant to SEC rules and has determined that the work provided by the Compensation Consultant did not raise a conflict of interest.
Benchmarking
We believe that a competitive pay package is a critical tool in our efforts to attract and retain qualified executives. During 2014 , the Compensation Committee engaged the Compensation Consultant to prepare an analysis to benchmark and assess our overall compensation program and practices against marketplace standards. This included a review of our peer group that resulted in the addition of Eaton Vance Corp., with which the Company competes for talent, and the removal of GFI Group Inc., which has a substantially smaller market capitalization than the Company. In addition, Knight Capital Group, Inc. and National Financial Partners Corp. were removed from the peer group as a result of merger and acquisition activity. The Compensation Committee's purpose in requesting this analysis was to ensure that


41 | 2015 Proxy Statement

Compensation Discussion and Analysis


the Company's executive compensation practices are competitive with our peers. Working with the Compensation Consultant, the Compensation Committee reviewed the total compensation that each of our named executive officers is eligible to receive against the compensation levels of comparable positions of the peer group. The companies within our revised peer group consisted of:
 
 
 
 
n
Alliance Data Systems,
Corp.
n
Fidelity National
Information Systems
n
Ameriprise Financial, Inc.
n
Fiserv, Inc.
n
Broadridge Financial
Solutions, Inc.
n
Raymond James
Financial, Inc.
n
Charles Schwab & Co.,
Inc.
n
SEI Investments
Company
n
DST Systems, Inc.
n
Stifel Financial Corp.
n
E*Trade Financial Corp.
n
TD Ameritrade Inc.
n
Eaton Vance Corp.
n
Waddell & Reed Inc.
 
Our goal is to ensure that we continue to measure our compensation practices against organizations that compete with us for key executives, that are considered important benchmarks in our industry, and that are comparable in size and scope to our business. As companies comprising our peer group change due to merger, acquisition, market capitalization, or business model, the Compensation Committee will consider appropriate changes to the group. For the year ended December 31, 2014 , revenue and market capitalization were as follows (in billions):
 
Revenue
 
Market Capitalization
Peer Group (Median)
$
2.9

 
$
7.5

LPL Financial Holdings Inc.
$
4.4

 
$
4.5

 
 
 
 
 
Compensation Program Developments in 2014
 
 
We continue to review and, where appropriate, to make changes to our compensation practices to bring them into greater alignment with our peer companies, provide greater transparency for our employees and investors, and create consistency in how compensation is determined across our organization. While no additional fundamental changes were made to our philosophy in 2014, the following changes became effective in 2014:
 
 
n
We expanded the definition of "Retirement" for purposes of accelerated vesting of equity awards granted beginning in 2014. The expanded definition includes a termination of employment upon the attainment of age 55 and completion of 10 years of service (in addition to the former Retirement definition, which was based upon to the attainment of age 65 and the completion of five years of service); and
 
 
n
We adopted a compensation recoupment policy that would apply in the event of a restatement of the Company's financial statements due to material non-compliance with financial reporting requirements under the securities laws.
 
 
In addition, as discussed in last year's proxy statement, during 2014, the Compensation Committee considered whether the use of executive employment agreements remained consistent with our overall compensation philosophy. Following a careful consideration of this issue, in February 2014, the Compensation Committee approved the following actions:
 
 
n
the termination of the employment agreements with Messrs. Casady, Arnold, and Moore, effective as of February 24, 2014; and
 
 
n
the amendment and restatement of our Executive Severance Plan, effective as of February 24, 2014, to provide for enhanced severance benefits as further described below.
 
 
Collectively, these changes were intended to further strengthen our performance orientation, align our program more closely with market practices, and promote greater executive engagement and retention.
 
 
 
 
 


2015 Proxy Statement | 42

Compensation Discussion and Analysis


Specific Compensation & Corporate Governance Policies and Practices
No Employment Agreements
We do not have individual employment agreements with any of our executive officers, including our named executive officers, although we have a practice of entering into offer letters with new executive officers that generally lay out the expected terms and conditions of their employment, including potential levels of compensation. Our executives serve at the will of the Board, and their rights to severance benefits following a termination of employment, if any, will be determined under our Executive Severance Plan, which applies uniformly to our executives at the managing director level and above.
Executive Severance Plan
Under our Executive Severance Plan, participants who experience a qualifying termination are eligible to receive continued payment of base salary for one year, an amount equal to the most recent annual bonus paid or payable to the executive and a subsidy of COBRA continuation benefits for one year.
Additional benefits, including possible accelerated vesting of time-based equity and equity-based awards, are described elsewhere in this proxy statement under " —Potential Payments upon Termination or Change-in-Control for the Year Ended December 31, 2014 ."
Stock Ownership Guidelines
We have adopted stock ownership guidelines that are intended to better align the interests of our executive officers with the interests of our stockholders.
Executives at the managing director level and above (which includes our NEOs) are required to achieve and maintain ownership of Common Stock at a threshold equal to three times his or her base salary, while our CEO is required to achieve and maintain a threshold equal to six times his base salary. Generally, executive officers have five years from the time they become an executive officer to meet the minimum ownership requirements. Our stock ownership guidelines may be found on our website at www.lpl.com. As of March 27, 2015 , all of our executive officers satisfied the minimum ownership threshold other than those who are still within the five year-time period to achieve such ownership.
Anti-Hedging and Anti-Pledging Policy
We believe that hedging transactions may permit executives to own Company securities obtained
 
through our executive compensation program or otherwise without the full risks and rewards of ownership. When that occurs, an executive may no longer have the same objectives as the Company’s other stockholders. As a result, we have adopted a policy, included within our Insider Trading Policy, which prohibits executives from hedging or monetization transactions, including through the use of puts and call options, collars, exchange funds, prepaid variable forwards, and equity swaps. We also prohibit executives from holding Company securities in a margin account, because a margin or foreclosure sale may occur when an executive is aware of material nonpublic information or otherwise not permitted to trade.
Rule 10b5-1 Plan Policy
The Company has adopted a policy (the “10b5-1 Policy”) for all executive officers and directors of the Company who adopt Rule 10b5-1 plans for trading in Company securities. The 10b5-1 Policy is designed to prevent inadvertent violations of the federal securities laws when implementing Rule 10b5-1 plans.
Annual Compensation Risk Assessment
The Compensation Committee annually reviews our executive compensation policies and practices to ensure that they do not encourage unnecessary and excessive risks. In 2014 , the Compensation Consultant provided a “comfort letter” in connection with the review, the results of which are discussed elsewhere in this proxy statement under “ Information Regarding Board and Committee Structure—Risk Management and Compensation Policies and Practices .”
Say-on-Pay Feedback from Stockholders
In 2011, we submitted our executive compensation program to an advisory vote of our stockholders, commonly referred to as a “say-on-pay” proposal, and it received the support of over 87% of the total votes cast at our 2011 annual meeting of stockholders. We also held an advisory vote in 2011 on the frequency of future say-on-pay proposals. Our stockholders recommended that say-on-pay votes occur every three years. In light of developing market practices, however, our Compensation Committee determined in 2014 that it is advisable to hold say-on-pay votes annually rather than triennially. Therefore, we now hold an advisory vote on the compensation of our named executive officers on an annual basis. The Compensation Committee intends to consider carefully the results of the advisory stockholder votes as it reviews and determines the total compensation packages for our NEOs. In 2014, we received strong support for our executive compensation program at


43 | 2015 Proxy Statement

Compensation Discussion and Analysis


our 2014 annual meeting of stockholders, as 99.5% of the total votes cast in the advisory vote on say-on-pay voted to approve the proposal.
162(m) Policy and Bonus Plan
Pursuant to Section 162(m) of the Internal Revenue Code, compensation in excess of $1 million that is paid to certain executive officers is not deductible unless it qualifies as “performance-based compensation.” Our Compensation Committee believes that in establishing the cash and equity incentive compensation programs for the Company's executive officers, the potential deductibility of the compensation payable under those programs should be only one of a number of relevant factors taken into consideration. From time to time, the Compensation Committee may, and reserves the right to, award or approve compensation that is not deductible under Section 162(m) in order to provide competitive levels of total compensation for our executive officers in a
 
manner designed to incentivize achievement of our strategic goals and objectives.
Our annual cash bonus awards to executive officers are generally granted under the Bonus Plan and structured to qualify as “performance-based compensation” under Section 162(m). Within the first 90 days of the annual performance period, the Compensation Committee establishes our objective performance criteria for the period and grants eligible participants a maximum potential award under the Bonus Plan based on that performance criteria. Following the conclusion of the performance period, the Compensation Committee certifies whether the objective performance criteria were satisfied. If so, the Compensation Committee may exercise negative discretion to determine the actual amount of the annual cash bonus awards to be paid to each participant under the Bonus Plan.



2015 Proxy Statement | 44

Report of the Compensation and Human Resources
Committee of the Board of Directors


Report of the Compensation and Human Resources Committee of the Board of Directors
The following independent directors, who constitute the Compensation Committee, have reviewed the Compensation Discussion and Analysis with our management and recommended that it be included in this proxy statement.
 
 
Anne M. Mulcahy, Chair
Richard W. Boyce
John J. Brennan
James S. Riepe
 
 
March 27, 2015

45 | 2015 Proxy Statement

Compensation of Named Executive Officers


Compensation of Named Executive Officers
In accordance with SEC rules, the equity awards shown in our Summary Compensation Table and Grants of Plan-Based Awards table for the fiscal year 2014 were granted in February 2014 in respect of services performed in 2013 . Please refer to the Compensation Discussion and Analysis included in last year's proxy statement for a discussion of these awards.
 
The tables in the following sections of this proxy statement provide information required by the SEC regarding compensation paid to or earned by our NEOs. The footnotes to these tables provide important information to explain the values presented in the tables and are an important part of our disclosures.

Summary Compensation Table for Year Ended December 31, 2014
The following table sets forth information concerning the total compensation for the years ended December 31, 2014 , 2013 , and 2012 for the NEOs:
Name and Principal Position
Year
 
Salary
($)
 
Bonus
($)
 
Stock
Awards
($)
 
Option
Awards
($) (1)
 
Non-Equity
Incentive Plan
Compensation
($) (2)
 
All Other
Compensation
($) (3)
 
Total
($)
Mark S. Casady
Chair, CEO
2014
 
885,479

(4)

 

 
3,079,998

 
1,485,000

 
71,440

 
5,521,917

2013
 
800,000

 

 

 
2,799,991

 
2,500,000

 
48,842

 
6,148,833

 
2012
 
800,000

 

 

 
2,800,000

 
1,000,000

 
57,553

 
4,657,553

Dan H. Arnold
President, former CFO
2014
 
542,740

(5)

 
648,473

 
419,980

 
536,250

 
51,087

 
2,198,530

2013
 
481,534

(6)

 
144,917

 
574,999

 
750,000

 
150,900

 
2,102,350

 
2012
 
421,858

(7)

 

 
408,002

 
292,000

 
181,577

 
1,303,437

David P. Bergers (8)
Managing Director, Legal & Government Relations and General Counsel
2014
 
600,000

 

 
297,004

 
393,474

 
900,000

 
49,130

 
2,239,608

2013
 
244,932

 
1,500,000

(9)
1,679,132

 
249,984

 
367,380

 
6,742

 
4,048,170


 


 


 


 


 


 


 


Robert J. Moore
Former President
2014
 
625,000

 

 
930,961

 
1,102,489

 
715,000

 
59,741

 
3,433,191

2013
 
625,000

 

 

 
1,362,499

 
1,100,000

 
40,646

 
3,128,145

 
2012
 
625,000

 

 

 
1,562,500

 
360,000

 
42,617

 
2,590,117

Michelle B. Oroschakoff (10)
Managing Director, Chief Risk Officer
2014
 
350,000

 

 
149,142

 
644,986

 
395,000

 
301,913

 
1,841,041

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Represents the total compensation expense that will be recognized for these awards determined under FASB ASC Topic 718. RSUs are valued using the closing price of the Common Stock on the date of grant. We use the Black-Scholes model to estimate our compensation cost for stock option awards. The underlying valuation assumptions for stock option awards are further disclosed in Note 15 , Share-Based Compensation , to our consolidated financial statements in our Annual Report and Note 15 , Stockholders' Equity , to our consolidated financial statements filed with our annual reports on
Form 10-K for the years ended December 31, 2013 and 2012 . Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.
(2)
Represents the dollar value of annual cash bonus awards earned under the Bonus Plan by each NEO. Because Mr. Bergers joined our Company after commencement of the 2013 performance period under the Bonus Plan, the 2013 amount shown for Mr. Bergers represents the annual cash bonus awarded outside the Bonus Plan, which was nevertheless calculated and paid in the same manner as if it had actually been awarded under the plan.
(3)
See " All Other Compensation" table below for additional information.
(4)
Mr. Casady began the year with a base salary of $800,000, but received an increase in salary to $900,000 during the year.
(5)
Mr. Arnold began the year with a base salary of $500,000, but received an increase in salary to $550,000 during the year.
(6)
Mr. Arnold began the year with a base salary of $440,000, but received increases in salary to $475,000 and then to $500,000 during the year.
(7)
Mr. Arnold began the year with a base salary of $400,000, but received an increase in salary to $440,000 upon his promotion to chief financial officer.
(8)
Mr. Bergers joined the Company on August 5, 2013, and therefore he did not receive compensation from the Company in 2012. His compensation is therefore disclosed for the years ended December 31, 2014 and 2013.
(9)
Represents a signing bonus.

2015 Proxy Statement | 46

Compensation of Named Executive Officers


(10)
Ms. Oroschakoff joined the Company on September 3, 2013 and was not a named executive officer in 2013. Her compensation is therefore only disclosed for the year ended December 31, 2014.
All Other Compensation
The following table sets forth information concerning All Other Compensation in the table above for the years ended December 31, 2014 , 2013 , and 2012 for the NEOs:
Name
Year
 
Personal Use of Company Chartered Aircraft
($)
 
Automobile Lease and Related Expenses
($)
 
Taxable Travel and Related Expenses
($) (1)
 
Taxable Relocation and Related Expenses
($) (2)
 
Reimbursement for Certain Taxes and Tax Planning Services
($) (3)
 
Securities Commissions
($)
 
401(k) Employer Match
($)
Total
($)
Mark S. Casady
2014
 

 
39,259

 
18,661

 

 

 

 
13,520

71,440

 
2013
 

 
37,119

 

 

 

 
223

 
11,500

48,842

 
2012
 
18,905

 
28,169

 

 

 

 
1,479

 
9,000

57,553

Dan H. Arnold
2014
 

 
23,832

 
13,735

 

 

 

 
13,520

51,087

 
2013
 

 
26,943

 

 
92,068

 
23,139

 

 
8,750

150,900

 
2012
 

 
26,581

 

 
148,196

 

 

 
6,800

181,577

David P. Bergers
2014
 

 
29,614

 
19,516

 

 

 

 

49,130

 
2013
 

 
6,742

 

 

 

 

 

6,742

Robert J. Moore
2014
 

 
50,696

 
2,795

 

 

 

 
6,250

59,741

 
2013
 

 
34,636

 

 

 

 

 
6,010

40,646

 
2012
 
4,633

 
32,859

 

 

 

 

 
5,125

42,617

Michelle B. Oroschakoff
2014
 

 
25,945

 
30,803

 
240,615

 

 

 
4,550

301,913

(1)
Consists of hotel and air travel expenses, and related tax gross-up payments, related to the attendance of the NEO and, except for Mr. Moore, the NEO’s spouse, at a conference hosted by the Company outside of the United States for its top-producing financial advisors. Tax gross-up payments of $6,093, $4,663, $6,372, $949, and $10,458 were made to Messrs. Casady, Arnold, Bergers, and Moore, and Ms. Oroschakoff, respectively.
(2)
Includes tax gross-up payments related to relocation expenses of $90,423 made to Ms. Oroschakoff in 2014 and $34,599 and $34,765 made to Mr. Arnold in 2013 and 2012, respectively.
(3)
Consists of reimbursement received from us for certain taxes and tax planning services incurred in 2013 in connection with Mr. Arnold's participation in the UVEST Plan, including a related tax-gross up of $12,074.

47 | 2015 Proxy Statement

Compensation of Named Executive Officers


NEO Compensation Mix
($ in thousands)
CEO Compensation Mix
NEO Compensation Mix
(excluding CEO)



2015 Proxy Statement | 48

Compensation of Named Executive Officers


2014 Grants of Plan-Based Awards
The following table provides additional information about non-equity and equity-based awards granted to our NEOs during the year ended December 31, 2014 :
Name
 
Grant Date
Estimated Future Payouts Under Non-Equity Incentive Plan Awards
All Other Stock Awards: Shares of Stock or Units
(#)
All Other Option Awards: Securities Underlying Options
(#) (1)
Exercise or
Base Price
of Option Awards
($)
Grant Date Fair Value of Stock and Option Awards
($) (2)
 
Target
Maximum
Mark S. Casady
 
 
$
2,475,000

$
5,000,000

 
 
 
 
 
 
 
 
 
2/24/2014
 
 

 
148,375

 
$
54.81

 
$
3,079,998

Dan H. Arnold
 
 
$
825,000

$
2,500,000

 
 
 
 
 
 
 
 
 
2/24/2014
 
 
3,284

 

 
$

 
$
173,855

 
 
2/24/2014
 
 
9,122

(3)

 
$