Finra hits TD Ameritrade with $500,000 fine for disclosures on callable securities

TD Ameritrade self-reported the lack of disclosure, which occurred from January 2016 to June 2021, to Finra, according to the settlement.

The Financial Industry Regulatory Authority Inc. on Thursday fined TD Ameritrade Clearing Inc. $500,000 for failing to disclose fully information about callable securities, including exchange-traded notes and preferred securities, to millions of customers over five years, according to Finra.

The lack of disclosure from January 2016 to June 2021 for almost 10 million transactions omitted required statements that the securities were callable, meaning the issuer of the security could repurchase it by a specific date, which could affect the securities’ yield, particularly in regard to the exchange-traded notes.

TD Ameritrade self-reported the matter to Finra, according to the settlement, in which the company agreed to Finra’s findings without admission or denial.

“This settlement resolves an unintentional oversight about the placement of certain information on trade confirmations for a few securities,” a spokesperson for Charles Schwab Corp., which acquired TD Ameritrade in 2020, wrote in an email. “While that same information was available in other materials provided to clients, including the prospectus, we promptly notified Finra over two years ago when we discovered the oversight and immediately corrected the issue.”

Over the five-year period, TD Ameritrade sent trade confirmations to clients who made more than 9.8 million purchases of the securities in question that failed to disclose the securities could be redeemed, and in the case of the exchange-traded notes, that a redemption before reaching full maturity could affect the yield of the securities.

Instead, TD Ameritrade used general language and guidance in the trade confirmations it sent to clients, in violation of industry rules and standards.

[More: Finra uses fine proceeds of $48.1 million to help fund improvements]