LPL Financial, Edward Jones, RBC, Stifel and TD Ameritrade are paying up to settle allegations they charged clients $19 million in unreasonably high commissions and other fees over the course of five years.
Each of the firms was accused of failing to ensure it was charging customers in a reasonable and fair way for trades made using its brokerage services. In a settlement initially reached with regulators in Massachusetts, Alabama, Iowa, Missouri, Montana, Texas and Washington, the firms agreed to pay an amount not exceeding $9.345 million to settle the allegations. They also will reimburse each of those states for costs incurred during the investigations.
According to a press release from Massachusetts Secretary of the Commonwealth William Galvin, commissions are often deemed unreasonable if they exceed 5% of the total value of a transaction. Some of the firms in the settlement were charging minimum commissions as high as $95, Galvin’s office said.
“This custom that some brokerage firms have of nickel-and-diming customers in order to line their pockets with commissions is something that I and other securities regulators have been watching closely,” Galvin said in a statement. “We have secured similar settlements for overcharged customers with other firms in the past, and we will continue to keep our eyes on any other firms that attempt to charge small-dollar investors these unreasonable fees.”
YOU MIGHT ALSO LIKE:The lucrative, murky revenue sharing between fund and wealth managersCambridge agrees to settle SEC charges for $15MSuspended brokerage got $600K in ‘secret’ commissions: FINRALess-common commissions still a temptation for excessive trading, FINRA case shows
State regulators join forces; firms respond
The firms in the settlement have also agreed to pay restitution to their customers, along with 6% interest. The $19 million the firms made in allegedly unreasonably high commissions came on 1.12 million small-dollar equity trades.
The investigation was coordinated by the North American Securities Administrators Association, which represents state and provincial regulators in the U.S., Canada and Mexico. A NASAA press release said 21 other states plan to join the settlement.
“This settlement is an important reminder to firms to be vigilant with regard to charging practices and to ensure they are dealing fairly with customers,” said NASAA Enforcement Section Chair Amanda Senn.
The time period for the transactions varied by firm. In TD Ameritrade’s case, they dated back to June 2018. In RBC’s, they date to May 2020.
A spokesperson for TD Ameritrade, which was acquired by Charles Schwab in 2020, said, “This matter involved historical commission practices tied to a small subset of trades — specifically, broker-assisted transactions that made up less than 1% of TD Ameritrade’s total order volume. We’re pleased to bring this issue to a close and remain committed to upholding the highest standards of fairness, transparency, and client care.”
A spokesperson for RBC said, “We are pleased to resolve this matter and will be reimbursing all impacted clients. Prior to the multi-state investigation, RBC had self-reported this issue to FINRA and took immediate steps to revise policies, procedures and systems. Our commitment to putting clients first remains our top priority.”
A spokesperson for Edward Jones said, “We cooperated fully with the NASAA task force investigation and are pleased to have resolved this matter. We are committed to integrity and transparency and continually work to further strengthen our processes, foster a culture of compliance, and safeguard the trust of our clients and colleagues.”
Stifel and LPL Financial did not immediately return requests for comment.
