Ending a more than two-year dispute, Scottrade has agreed to pay a $250,000 fine to the Massachusetts Securities Division related to supervision and training regarding sales contests.
Commonwealth Secretary William Galvin, the state’s top securities regulator, charged the broker-dealer on Feb. 15, 2018, with violating the Massachusetts Uniform Securities Act and “dishonest and unethical activity and failure to supervise” for conducting sales contests.
Galvin said in announcing the complaint against Scottrade that the sales contests violated Labor’s impartial conduct standards, which took effect on June 9, 2017.
If the Labor Department “will not enforce its own laws and rules, then the states must do what they can to protect retirees from firms who believe they can play with peoples’ life savings by conducting sophomoric contests,” Galvin stated at the time.
TD Ameritrade, however, said in statement to ThinkAdvisor Thursday that the order “relates solely to supervision issues, and specifically to training; the Order states no violation whatsoever regarding the impartial conduct standards.”
The “single violation” stated in the order, TD maintained, “is a failure reasonably to supervise under Massachusetts law because all Scottrade investment consultants had not received training related to a policy Scottrade adopted governing sales contests.”
The order , TD continued, “does not find or charge any violation of the impartial conduct standards and there is no suggestion that Scottrade did not, in fact, act at all times in the best interests of its clients.”
Labor’s rule was later vacated on June 21, 2018, by the U.S. Court of Appeals for the 5th Circuit.
TD Ameritrade Holding Corp. announced plans to buy Scottrade for about $4 billion on Oct. 24, 2016.
The Scottrade sales contest took place prior to the close of TD Ameritrade’s acquisition of the broker-dealer. “We are pleased to have reached a resolution after more than two years and welcome the opportunity to put the issue behind us,” TD Ameritrade said in a statement shared with ThinkAdvisor.
While the order names Scottrade, “TD Ameritrade decided to settle (and pay the fine), without admitting or denying the findings, to avoid the further costs and risks of litigating the matter.”
As of Feb. 26, 2018, Scottrade’s accounts and operations were transferred to TD Ameritrade and its affiliate clearing firm, TD Ameritrade Clearing. (TD Ameritrade is set to be acquired by Charles Schwab by year-end.)
Scottrade is no longer doing business in Massachusetts and requested the withdrawal of its broker-dealer registration on July 9, 2018.