U.S. state securities regulators are settling allegations against five brokerage firms for overcharging retail investors on small transactions.
The North American Securities Administrators Association (NASAA) announced a settlement with five firms — Edward Jones, LPL Financial, RBC, Stifel and TD Ameritrade — which arose from an investigation by various state regulators that found “the five firms charged unreasonable commissions to thousands of retail brokerage customers on certain equity transactions.”
According to NASAA, the investigation found that, over a five-year period, the firms charged approximately US$19 million to process 1.12 million low-value equity trades.
“In this case, numerous equity transactions executed by the five firms included a commission well in excess of 5% of the principal value of the transaction at issue,” the group said.
Under the settlement, the firms agreed to pay restitution to affected customers, plus 6% interest. They will also pay up to US$9.35 million in fines, plus costs, to the states.
Additionally, they must revise their policies and procedures to guard against charging excessive fees.
“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 Amanda Senn, enforcement section chair for NASAA and director of the Alabama Securities Commission, in a release.