Some Mississippians will receive payments after a multi-state settlement was reached with five national investment firms that were found to have charged excessive commissions on retail investors, specifically on small-dollar equity transactions.
Secretary of State Michael Watson announced Monday that Mississippi joined the multimillion-dollar settlement with Edward Jones, LPL Financial, RBC, Stifel, and TD Ameritrade. The group of brokerage firms will collectively pay over $19 million in restitution to affected customers and up to $9.345 million in fines and costs.
An investigation led by the North American Securities Administrators Association and state regulators found the firms violated state securities laws by imposing minimum commission charges on small principal trades. In a bulk of cases, the minimum charges ranged from $25 to $95, disproportionately impacting trades with low principal amounts.
The investigation determined that over a five-year period, the firms charged approximately $19 million across 1.12 million trades. Standards set under FINRA Rule 2121 say a commission pattern of 5% or less may be considered unfair or unreasonable. Investigators discovered commissions well in excess of 5% of the transaction’s principal value.
“State securities laws prohibit firms from charging unreasonable commissions,” NASAA President Leslie Van Buskirk said. “This settlement will result in restitution to investors and shows once again that state securities regulators will take decisive action to protect investors.”
“Through the diligent and persistent work of Eric Lee and our Securities Division, Mississippi investors may have confidence that their hard-earned dollars are safe. Companies operating in Mississippi will be held accountable and be required to follow the law,” Secretary Watson added.
Settlement terms require the firms to provide affected customers with restitution, plus interest in the amount of 6%. The firms must also take measures to ensure policies and procedures include safeguards to prevent charging excessive fees.
More than 20 states have joined Mississippi in signaling intent to join the settlement.
