Scottrade Fined $50,000 for Supervisory Failures in Notification of Customers

Mar 7

Scottrade Inc. was fined $50,000 and reprimanded for failing to promptly notify certain customers when money was wired from their accounts to third parties.

Texas Securities Commissioner John Morgan entered the Disciplinary Order on March 7. The fine will be paid to the General Revenue Fund of the State of Texas.

In 2014, the State Securities Board initiated an investigation into Scottrade’s supervision of third-party wire transfers that are processed through Scottrade’s Advisory Services platform. Scottrade provides the platform to customers who receive advisory services from independent investment advisers.

The State Securities Board investigated Scottrade’s compliance with its third-party wire transfer procedures from January 2011 through July 2015.

From January 2011 to October 2013, Scottrade didn’t provide certain customers with a contemporaneous notification that funds had been transferred from their account to a third party.

In one instance, Scottrade detected a fraud related to the processing of a third-party wire transfer from a Texas resident’s account. Scottrade and the Texas customer resolved the matter.

In October 2013, Scottrade implemented an automated procedure to provide customers with a notification when customer funds are transferred via wire to a third party.

In failing to require a contemporaneous notification to clients of third-party wire transfers, Scottrade violated a State Securities Board rule requiring securities dealers to establish and enforce procedures designed to achieve compliance with securities laws.

In addition to the fine paid to State of Texas, Scottrade agreed to pay $50,000 to the Investor Protection Trust, a nonprofit organization that supports investor education efforts in Texas and other states.