Several broker/dealers firms, including Edward Jones, LPL Financial, RBC, Stifel and TD Ameritrade, will pay millions to settle state securities regulators’ accusations that they charged unreasonable commissions on small-dollar transactions.
According to the North American Securities Administrators Association, the five firms collectively charged about $19 million to process more than 1 million small-dollar equity transactions and trades between April 2020 and 2025 (besides TD Ameritrade, which ran between 2018 and 2023 and is now owned by Charles Schwab).
Regulators from Alabama, Iowa, Massachusetts, Missouri, Montana, Texas and Washington participated in the investigation.
The multi-state working group was led by the office of Massachusetts Commonwealth Secretary William Galvin (who is no stranger to multimillion-dollar settlements with prominent financial firms). According to Galvin, they’d “secured similar settlements for overcharged customers” for other firms in the past, and pledged to monitor the industry for similar tactics.
“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.
According to the consent order Massachusetts’ Securities Division filed last week, the five firms didn’t ensure small-dollar transactions were executed at “a fair and reasonable price,” overcharging customers by applying minimum commission charges as high as $95.
State securities regulations prohibit firms from charging “unreasonable” commissions, saying a charge exceeding 5% of the total transaction should be seen as unreasonable.
According to LPL’s settlement, while its fee schedules mandated that the maximum commission on a charge should not exceed 5%, it didn’t have a similar restriction for transactions involving a “minimum equity commission” of 30%. According to NASAA, “numerous equity transactions” at all the firms easily exceeded 5% of the transaction’s principal value.
A Schwab spokesperson said in a statement that the issue related to a small subset of trades that made up than 1% of TD Ameritrade’s total order volume.
“We’re pleased to bring this issue to a close and remain committed to upholding the highest standards of fairness, transparency, and client care,” the spokesperson said.
An RBC spokesperson said the firm was “pleased” to resolve the matter and would reimburse all impacted clients, saying that before the investigation, “RBC had self-reported this issue to FINRA and took immediate steps to revise policies, procedures and systems.”
Representatives from the other firms did not return requests for comment.
As part of the settlement, the firms agreed to offer customers restitution and interest totaling 6% from the date of the particular transactions through the date of execution and the settlement. The firms will collectively pay $9.345 million to the settling states and reimburse them for the investigative costs.
In addition to the states involved in the investigation, 21 more states are signlaing they will sign on to the settlement, including Alaska, Arkansas, California, Colorado, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Maine, Mississippi, New Mexico, North Carolina, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, West Virginia and Wisconsin.