Five brokerage firms have agreed to pay restitution and penalties as part of a multistate settlement over charges that they levied excessive commissions on retail investors, especially on small-dollar equity transactions.
Edward Jones, LPL Financial, RBC Capital Markets, Stifel, and TD Ameritrade will collectively pay more than $19 million in restitution to affected customers and up to $9.87 million in fines and costs.
The settlement follows a multiyear investigation led by the North American Securities Administrators Association and state regulators, with Massachusetts serving as the lead state.
According to a statement NASAA published Monday, regulators found the firms violated state securities laws by imposing minimum commission charges – often exceeding 5 percent of the transaction value – on small principal trades, contrary to standards set under FINRA Rule 2121. In several cases, the minimum charges ranged from $25 to $95 per trade, disproportionately impacting trades with low principal amounts.
In a separate statement, Secretary of the Commonwealth of Massachusetts William Galvin, whose office brought the enforcement action on behalf of Massachusetts, emphasized the broader regulatory concerns.
“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 on Monday.
Galvin referenced his Securities Division's similar actions against other firms in the past – one case in 2023 saw Raymond James paying Massachusetts and five other states a total of $4.2 million in fines and penalties – vowing "to keep our eyes on any other firms that attempt to charge small-dollar investors these unreasonable fees."
The investigation unveiled Monday determined that over a five-year period, the firms charged commissions totaling approximately $19 million across 1.12 million trades.
Edward Jones alone accounted for more than $11 million of that amount on more than 780,000 trades. The firm agreed to pay a $100,000 fine and $25,000 in investigative costs to the state of Massachusetts.
LPL Financial charged $2.49 million in excessive commissions on over 127,000 trades nationwide, and will pay $25,000 in fines to the state. RBC Capital Markets, which imposed a $95 minimum commission on some trades, charged about $3.4 million in total and was assessed a $25,000 fine.
Stifel was found to have applied a $40 minimum commission, resulting in $885,480.13 in charges across approximately 45,000 transactions. The firm agreed to a $30,000 total payment to Massachusetts, including fines and costs.
TD Ameritrade – which was absorbed by Charles Schwab following its reported violative conduct between June 2018 and June 2023 – was fined $15,000 and agreed to pay $35,000 in investigative costs for its role in charging more than $913,000 in excessive commissions. The firm’s minimum broker-assisted trade commission had been as high as $44.99 before 2019.
The firms are also required to update internal policies and supervisory procedures to prevent the recurrence of such practices. In most cases, they will certify that no commissions on equity trades will exceed five percent of the trade’s principal value without a documented exception.
“State securities laws prohibit firms from charging unreasonable commissions,” said NASAA President Leslie Van Buskirk. “This settlement will result in restitution to investors and shows once again that state securities regulators will take decisive action to protect investors.”
“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,” added Amanda Senn, NASAA Enforcement Section chair and director of the Alabama Securities Commission.
More than 20 additional states have signaled intent to join the settlement, further expanding its reach and potential financial impact.
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