William Galvin, Secretary of the Commonwealth of Massachusetts, on Wednesday charged Charles Schwab & Co. over unethical and deceptive practices that allowed a third-party investment adviser to continue to collect advisory fees from Schwab customers’ accounts for years after his registration had lapsed.
The financial adviser at the center of the allegations is James Patrick O'Connell, who was last registered as an investment adviser in 2014. Since then, he has collected at least $125,000 in investment advisory fees, according to the Massachusetts complaint.
The Massachusetts Securities Division discovered the alleged illegal activities while investigating a complaint of exploitation of senior citizens by O’Connell, according to a statement by Galvin.
Charles Schwab is a leading custodian for investment advisers and works with thousands of independent financial advisers.
A spokesperson for Charles Schwab wrote in an email that the firm is committed to its compliance responsibilities and earning the trust of its clients. The spokesperson did not mention the Massachusetts allegation.
O'Connell did not return a call Wednesday afternoon to comment.
Galvin’s office is seeking an order requiring Schwab to reimburse investors for all fees paid to O’Connell while he was unregistered. The Massachusetts Securities Division is also asking that O’Connell and Schwab be fined.
State securities regulators have been busy recently bringing enforcement actions against unregistered investment advisers.
O’Connell was removed from Schwab’s platform in 2012 for allowing his registration to lapse for nearly two years, which also resulted in a reprimand from the Massachusetts Securities Division.
Despite this removal, Schwab took no steps to monitor customer accounts for further payments to O’Connell, who collected at least $46,000 in investment fees from Schwab brokerage accounts over a period of more than six years while remaining unregistered, the complaint alleges.
O’Connell continued to make recommendations to clients and collect fees from their accounts, and also made recommendations that were unsuitable, according to the complaint. He issued blanket recommendations without respect to individual client needs and over-concentrated portfolios in global communication infrastructure companies, Massachusetts alleges.
Quarterly analysis of retirement accounts highlights positive behavior.
Insiders say the Wall Street giant is looking to let clients count certain crypto holdings as collateral or, in some cases, assets in their overall net worth.
The two wealth tech firms are bolstering their leadership as they take differing paths towards growth and improved advisor services.
“We think this happened because of Anderson’s age and that he was possibly leaving,” said the advisor’s attorney.
The newly appointed leader will be responsible for overseeing fiduciary governance, regulatory compliance, and risk management at Cetera's trust services company.
How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave
From direct lending to asset-based finance to commercial real estate debt.
