State securities regulators have reached settlements with Edward Jones, LPL Financial, and three other firms following allegations of unreasonable commission charges on small-dollar trades, resulting in a combined $9.3 million in fines.
The North American Securities Administrators Association (NASAA), which represents state securities regulators, announced the settlements and outlined the steps firms must take to avoid similar issues in the future.
NASAA’s investigation, conducted in collaboration with seven state regulatory agencies, uncovered $19 million in excessive charges over five years across 1.12 million transactions involving thousands of investors. “This outcome underscores our commitment to protecting investors and ensuring fair practices,” said Leslie Van Buskirk, NASAA President and Wisconsin Securities Administrator.
Minimum Commission Charges at the Core of the Issue
The firms’ practices allegedly violated state regulations that cap reasonable commissions at 5% of transaction value. In many cases, the firms applied flat minimum commission charges, inflating costs for small-dollar trades. For example, Edward Jones imposed a $50 fixed commission on certain equity trades, leading to overcharges on 6,603 transactions in Massachusetts alone. The Massachusetts Securities Division reported that these practices generated $94,079 in excessive fees for Edward Jones customers.
Policy Failures and Corrective Measures
While Edward Jones had policies allowing supervisors to adjust unreasonable commissions, its systems failed to flag and address problematic transactions. In response, the firm has pledged to enhance its compliance processes. “Integrity and transparency remain at the heart of our business,” said an Edward Jones spokeswoman. “We’ve taken steps to strengthen safeguards and maintain the trust of our clients.”
RBC, another firm implicated in the investigation, also highlighted its proactive efforts. A company representative stated, “RBC self-reported this issue to FINRA before the investigation began and has since revised its policies and systems. Reimbursing affected clients is a top priority.”
LPL, Stifel, and TD Ameritrade’s Role in the Investigation
LPL Financial, Stifel Financial, and TD Ameritrade were similarly scrutinized. Massachusetts regulators emphasized that these firms failed to ensure commissions on small-dollar trades were reasonable. A representative for Stifel declined to comment, while LPL did not respond to inquiries.
TD Ameritrade, now part of Charles Schwab following a 2020 acquisition, saw enforcement action tied to broker-assisted trades that accounted for less than 1% of its total order volume. “This matter involved historical practices on a small subset of trades,” a Schwab spokeswoman noted. “We’re committed to fairness and transparency and are pleased to resolve this issue.”
Broader Implications for RIAs and Financial Professionals
The settlements reflect growing regulatory scrutiny of firms’ pricing practices, particularly in cases impacting retail investors. Secretary of the Commonwealth William F. Galvin, a vocal advocate for investor protection, reaffirmed regulators’ commitment to addressing “nickel-and-diming” tactics. “We’ve pursued similar settlements in the past and will continue monitoring firms that impose unreasonable fees on small-dollar investors,” Galvin said.
This case serves as a reminder for wealth advisors and RIAs to review their fee structures and compliance measures. Transparency and adherence to state and federal regulations are essential not only to avoid penalties but also to maintain client trust in an increasingly vigilant regulatory environment.
