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FINRA fines TD Ameritrade over lack of disclosure on callable securities

On Behalf of | Jun 27, 2023 | FINRA Compliance

TD Ameritrade was penalized by the Financial Industry Regulatory Authority over violations involving callable securities, according to InvestmentNews.

The firm was fined $500,000 after FINRA found it failed to fully disclose information about the securities to customers over a five year period from January 2016 to June 2021.

According to a letter of acceptance, waiver and settlement, TD Ameritrade sent its customers confirmations for about 9.8 million transactions that omitted required disclosures regarding their purchases of exchange traded notes and preferred securities. FINRA said the confirmations failed to disclose that the securities were callable and that in the case of the ETNs, the early redemption could affect the yield of the securities.

It was determined that TD Ameritrade relied upon general language in the confirmations stating that if the transactions involved callable securities, the call features could affect yield. The company was found to be in violation of Exchange Act Rule 10b-10(a)4, promulgated under Section 10(b) of the Securities Exchange Act of 1934, and FINRA Rules 2232 and 2010.

TD Ameritrade self-reported the matter pursuant to FINRA Rule 4530 in 2021 and voluntarily took corrective action. The firm did not admit or deny the allegations but agreed to accept FINRA’s findings. A spokesperson for Charles Schwab Corp., which acquired TD Ameritrade, said the matter resulted from “an unintentional oversight about the placement of certain information on trade confirmations for a few securities.”

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