Five large brokerage firms must reimburse customers $19 million as the result of a nationwide crackdown by state securities regulators on what they say are commission overcharges on small-dollar transactions, according to Massachusetts Secretary of State William F. Galvin whose office led the investigation.
According to consent orders fied by Galvin’s securities division last week, Edward Jones, LPL Financial, RBC, Stifel, and TD Ameritrade will pay up to $9,870,000 in fines in addition to providing restitution to affected customers.
The firms have denied any wrongdoing.
According to the consent documents, the brokerage firms “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.
The investigation looked at conduct during the approximate time period of May 1, 2020, to April 30, 2025. During that five-year period, regulators said that, nationwide, the firms charged approximately $19 million to process 1.12 million small dollar equity transactions and trades.
State securities regulations prohibit firms from charging unreasonable commissions, with commission charges that exceed 5% of the total transaction often considered to be unreasonable.
“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 in announcing the settlement.
Galvin said states have secured similar settlements for overcharged customers with other firms in the past, and they will continue to oppose attempts to charge small-dollar investors unreasonable fees.
Customers will receive refunds in the amounts that they were overcharged, with 6% interest.
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 (NASAA). In addition to Galvin’s office, the working group included regulators in Alabama, Iowa, Missouri, Montana, Texas, and Washington.
Galvin said at least 21 other states intend to join the settlement.
Topics Agencies
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