Brazos Securities Inc. of Dallas will pay a $20,000 fine to the State of Texas and pay $32,569 to a client who was charged excessive fees after being moved to an investment advisory account at the firm.
The Disciplinary Order, which Texas Securities Commissioner Travis J. Iles entered Nov. 5, sanctioned Brazos Securities for not having supervisory procedures in place governing fees for clients who are moved from brokerage to investment advisory accounts.
Brazos Securities receives commissions based on the transactions it makes in buying and selling stocks, mutual funds, and other securities for clients in brokerage accounts. Clients in the firm’s investment advisory accounts pay fees based on the value of assets in the account.
In 2014, an investment adviser representative with Brazos Securities began recommending his clients convert their brokerage accounts to investment advisory accounts.
The firm charged a reduced fee of 0.5% of assets under management to some clients who moved into investment advisory accounts because the clients would continue to pay other costs associated with managing their investments.
One client, however, paid fees ranging from 1% to 2% of assets under management in addition to other investment costs. From 2014 to 2017, the client paid average annual fees of $16,774 per year, even though the firm made no changes in the trading strategy or investments recommended to the client.
From 2010 to 2013, when the client was in a brokerage account at the firm, the client paid annual average fees of $8,632.
The repayment to the client reflects the difference in fees over those periods.
The $20,000 fine will be deposited into the General Revenue Fund of the State of Texas.