Ohio part of multistate, multimillion-dollar settlement impacting thousands of Ohio investors
The Ohio Department of Commerce Division of Securities announces that Ohio has joined a multimillion-dollar settlement with dozens of other state securities regulators following an investigation into five investment firms. The $9.345 million settlement follows investigators’ allegations that Edward Jones, LPL Financial, RBC, Stifel and TD Ameritrade charged unreasonable commissions to retail customers on small-dollar transactions.
Data shows that during a five-year period covered by the investigation, the firms charged about $19 million to process 1.12 million small-dollar equity transactions and trades nationwide.
State securities laws prohibit firms from charging unreasonable commissions to clients. To determine excessive or unreasonable fees, regulators consider several factors, including guidance provided by the brokerage industry’s self-regulatory organization, Financial Industry Regulatory Authority (FINRA). Pursuant to guidance under FINRA Rule 2121, a commission pattern of 5% or less may be considered unfair or unreasonable. In this case, numerous equity transactions executed by the firms involved included a commission well in excess of 5% of the principal value of the transaction at issue.
At least 40,000 investors in Ohio have already reported losses totaling nearly $600,000, and the Division expects these figures to grow as the legal proceedings continue to unfold.
The settlement announced by the North American Securities Administrators Association (NASAA) followed an investigation led by a multijurisdictional working group of state securities regulators in Alabama, Iowa, Massachusetts, Missouri, Montana, Texas and Washington. Regulators found the five firms charged unreasonable commissions to thousands of retail brokerage customers on certain equity transactions.
As a result of the investigation and settlement terms, the firms have agreed to provide affected customers with restitution, plus interest in the amount of 6% from the date of the customer’s transaction through the date of execution of the Term Sheet and Offer of Settlement. Fines and costs will also be assessed. The firms will pay total fines not to exceed $9.345 million to settling states, in addition to reimbursement of investigative costs to the states in the working group. Each firm must also take measures to ensure its policies and procedures include safeguards to prevent charging excessive fees.
“Investor protection is the core principle guiding our efforts, and this settlement reflects the importance of ensuring fair treatment for retail customers,” Ohio Securities Commissioner Andrea Seidt said. “By working together, state securities regulators have not only secured restitution for affected customers, but they have also reinforced the importance of fair and transparent practices in the marketplace.”
Publisher's note: A free press is critical to having well-informed voters and citizens. While some news organizations opt for paid websites or costly paywalls, The Highland County Press has maintained a free newspaper and website for the last 26 years for our community. If you would like to contribute to this service, it would be greatly appreciated. Donations may be made to: The Highland County Press, P.O. Box 849, Hillsboro, Ohio 45133. Please include "for website" on the memo line.