By Andrew Welsch

Five brokerage firms, including Edward Jones and LPL Financial, have agreed to pay a combined $9.3 million in fines to settle state securities regulators' allegations that they charged unreasonable commissions to retail customers on small dollar stock trades.

Edward Jones, LPL, RBC, Stifel Financial, and TD Ameritrade are also required to ensure they have safeguards in place to prevent them from resuming excessive charges, according to The North American Securities Administrators Association. Nasaa, an organization of state securities regulators, announced the settlement Monday.

An investigation led by seven states found that the firms charged approximately $19 million over a five-year period to process 1.12 million small dollar equity transactions and trades on behalf of thousands of investors, Nasaa said. "This settlement will result in restitution to investors and shows once again that state securities regulators will take decisive action to protect investors," said Leslie Van Buskirk, Nasaa president and Wisconsin Securities Administrator.

Massachusetts Securities Division, which participated in the investigation, said the brokerage firms failed to ensure small-dollar trades were executed at a fair and reasonable price. The firms overcharged customers by applying minimum commission charges as high as $95. State securities regulation prohibits charging commissions that exceed 5% of the total transaction often considered to be unreasonable.

For example, Edward Jones charged a minimum $50 fixed commission on certain equity transactions, according to the Massachusetts Securities Division. The company's policies and procedures allowed supervisors to make adjustments to ensure that commissions were reasonable, but its systems failed to detect and correct 6,603 equity transactions executed in Massachusetts. As a result, Edward Jones charged $94,079 in unreasonable commissions, according to the regulator.

A spokeswoman for Edward Jones, also based in St. Louis, said the firm had cooperated fully with the investigation and was pleased to have resolved the matter. "We are committed to integrity and transparency and continually work to further strengthen our processes, foster a culture of compliance, and safeguard the trust of our clients and colleagues," the spokeswoman said.

A spokesman for St. Louis-based Stifel declined to comment. Representatives for LPL didn't respond to a request for comment.

A representative for RBC said the firm was pleased to resolve the matter and will reimburse affected clients. "Prior to the multi-state investigation, RBC had self-reported this issue to [industry self-regulatory organization] Finra and took immediate steps to revise policies, procedures and systems. Our commitment to putting clients first remains our top priority."

The investigation covered activity at TD Ameritrade from 2018 to 2023 and activity at the other four firms from 2020 to 2025, according to consent orders issued by Massachusetts' securities regulator.

TD Ameritrade was acquired by Charles Schwab in October 2020. A spokeswoman for Schwab, which isn't named in the enforcement action, said in a statement: "This matter involved historical commission practices tied to a small subset of trades -- specifically, broker-assisted transactions that made up less 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."

Secretary of the Commonwealth William F. Galvin says he and other regulators have been watching "nickel and diming" at some brokerage firms. "We have secured similar settlements for overcharged customers with other firms in the past, and we will continue to keep our eyes on any other firms that attempt to charge small-dollar investors these unreasonable fees."

Write to Andrew Welsch at andrew.welsch@barrons.com

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(END) Dow Jones Newswires

June 09, 2025 15:51 ET (19:51 GMT)

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