Massachusetts' top securities regulator, William Galvin, has ordered five brokerage firms to pay close to $10 million in fines for charging nearly $19 million in what he called unreasonably high commissions over a five-year period.
The firms must also refund investors in several states the amount they were overcharged, plus 6% interest, Galvin's office said.
According to consent orders filed last week by the state's Securities Division, the brokerage firms — LPL Financial, Edward Jones, RBC Capital Markets, Stifel and TD Ameritrade — failed to ensure small-dollar transactions were executed at a fair and reasonable price, "overcharging customers by applying minimum commission charges as high as $95, regardless of the reasonableness of the commissions," Galvin's office announced Monday.
“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. “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.”
The settlements are the result of an ongoing investigation by a multi-state working group of securities regulators, in coordination with the North American Securities Administrators Association.
As of Monday, Alaska, Arkansas, California, Colorado, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Mississippi, New Mexico, North Carolina, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, West Virginia and Wisconsin intend to join the settlement.
The firms were ordered to pay a combined $319,086 in restitution to Massachusetts residents.
According to the consent orders:
- Edward Jones charged unreasonable commissions on approximately 781,240 equity transactions totaling $11.3 million.
- LPL charged unreasonable commissions on approximately 127,045 equity transactions from April 30, 2020, to April 30, 2025, totaling $2.5 million.
- Stifel charged unreasonable commissions on approximately 45,352 equity transactions totaling $885,480.
- TD Ameritrade charged a commission in excess of 5% on approximately 84,618 equity transactions totaling $913,223.
- RBC charged commissions in excess of 5% of the principal amount on approximately 89,900 equity transactions totaling approximately $3.4 million.
The working group, led by Galvin’s office, also included regulators in Alabama, Iowa, Missouri, Montana, Texas and Washington.
“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, director of the Alabama Securities Commission and NASAA Enforcement Section chair, in another statement.
Massachusetts will also receive $255,000 in administrative fines.
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