DFI Announces Settlements With Five Brokerage Firms, Securing More Than $619,000 in Restitution for Washington Investors

Olympia – The Washington State Department of Financial Institutions (DFI) recently entered into five consent orders with broker-dealer firms that charged unreasonable commissions to investors. The five broker-dealer firms are Edward Jones, LPL Financial, RBC Capital, Stifel, and TD Ameritrade. Each firm agreed to refund Washington customers for commissions they collected in excess of 5% on 34,944 equity trades, totaling more than $619,700.

Under Washington law, commissions charged by broker-dealer firms on securities transactions must be reasonable. Commissions that are more than 5% of the total transaction are often unreasonable, although a commission of less than 5% may also be unreasonable depending on factors such as the type of security, whether markups are being charged, and the availability of the stock in the market.

After noticing a pattern of high commissions on certain small-dollar securities transactions, a multi-state group of regulators formed to investigate the issue. Washington, Alabama, Iowa, Massachusetts, Missouri, Montana, and Texas led the investigation. The group determined that some firms that charged minimum commissions collected a commission of more than 5% on equity transactions totaling $2,500 or less. In some instances, the firm charged a commission that was most or all of the trade. The group of states entered into a multi-state agreement with each firm, resulting in the consent orders with DFI.

“Washington investors work hard to save money for their retirement,” DFI Director Charlie Clark said. “With the current global economic volatility, it’s more important than ever to ensure the people and organizations Washingtonians entrust with their money aren’t taking more than necessary to handle their investments.”

In addition to paying restitution plus interest, the firms agreed to make changes to their policies and procedures to prevent these unreasonable commissions from being charged moving forward. They also agreed to pay DFI fines totaling $185,000 and, because DFI was a lead state, investigative costs totaling $70,000.