Multimillion-Dollar Settlement Related to Unreasonable Commissions
Texas State Securities Board
AUSTIN, TEXAS (News Release) – The Texas State Securities Board announced that it has joined a multi-state settlement with five firms after reviewing the firms’ practices of charging unreasonable commissions to retail customers on small-dollar transactions. Texas, along with Alabama, Iowa, Massachusetts, Missouri, Montana, and Washington led the investigations into Edward Jones, LPL Financial, RBC, Stifel, and TD Ameritrade and found that over a period of five years, the firms charged their retail customers approximately $19 million to process slightly over $1 million worth of equity transactions and trades.
State securities laws prohibit firms from charging unreasonable commissions to their customers. And FINRA Rule 2121, which states that a commission pattern of five percent or even less may be considered unfair or unreasonable, provides additional guidance. During the investigation, it was uncovered that numerous equity transactions executed by the five firms included a commission well in excess of five percent of the principal value of the transaction.
As a result of the investigation and settlement terms, the firms have agreed to provide affected customers with restitution, plus interest in the amount of six percent from the date of the transaction through the date of execution of the Term Sheet and Offer of Settlement. Fines and costs will also be assessed. The firms will pay total fines not to exceed $9,345,000 dollars to the states that choose to join the settlement, which to date includes 27 states.
Notably, each firm has also agreed take measures to ensure that its policies and procedures include safeguards to prevent firms from charging excessive fees in the future.
“We are always happy to see money going back to Texas investors,” said Commissioner Travis J. Iles. “This was a long, complex, and thorough investigation. We appreciate the coordination among the working group states and the willingness of the firms to correct the wrong that was done here and get money back to the harmed investors—not only in Texas, but across the country.”
Deputy Commissioner Cristi Ramón Ochoa and Elliott Wolf, Attorney, Litigation & Investigation Division, led Texas’ efforts in realizing a great result for Texans.
