Brokerages Agree to Settle Overcharged Fees
Five brokerages have come to an agreement to pay up to $28.8 million in fines and compensation following an investigation by Massachusetts Secretary of State William F. Galvin. The probe revealed that these companies charged unfair fees on small securities transactions.
This settlement affects seven states, including Massachusetts, where the firms will pay over $300,000 in compensation to customers and a state fine of $255,000.
The companies involved have neither admitted nor denied the allegations regarding overcharging, but they have consented to the settlement. The firms in question include Edward D. Jones, TD Ameritrade, LPL Financial, RBC Capital Markets, and Stifel Nicolaus. This information was shared in a press release from Galvin’s office.
According to the findings, Edward D. Jones stands out with over $11 million attributed to its charges, making it the largest offender among the group. The company has agreed to pay $114,782 to approximately 6,600 Massachusetts customers who engaged in transactions over the past five years, translating to roughly $17 per individual.
Businesses are prohibited from imposing unreasonable fees on clients under state securities laws. The North American Securities Administrators Association (NASAA) helped coordinate the investigation.
To assess whether fees are excessive, regulators look at guidelines established by self-regulatory organizations in the financial industry. NASAA noted that fees exceeding 5% could be flagged as unfair under FINRA regulations.
“In this scenario, there were numerous stock transactions executed by these brokerages where the fees exceeded 5% of the transaction’s value,” NASAA explained.
Galvin commented in a press release, stating, “It’s a recurring issue—some brokerages seem to nickel and dime their customers to boost their own profits. This is something I, along with other securities regulators, frequently observe.”
He added that similar settlements have been reached with other firms in the past for excess charges and that they will continue scrutinizing companies that attempt to apply such unfair fees.
Customers who were overcharged could earn 6% interest on the fees from the date of the transaction, as indicated by NASAA. Moreover, 21 states, including Maine, are also pursuing similar settlements.
