TD Ameritrade Inc. on July 27 agreed to pay a $300,000 fine to the State of Texas for failing to enforce procedures related to notification of wire transfers from certain customer accounts.
Ameritrade provides brokerage services to retail investors through its Retail division as well as through its Institutional Platform for independent investment advisers providing investment advice to retail clients. In 2014, the State Securities Board conducted an investigation related to wire transfers made from customer accounts on the Institutional Platform.
With respect to the wire transfers reviewed, the State Securities Board found that, in many instances, Ameritrade failed to send the relevant customer a notification of the wire transfer. Since 2011, Ameritrade's procedures have required the delivery of these notifications, referred to as "disbursement notices." However, until August 2014, Ameritrade used a manual process to compile and distribute disbursement notices for Institutional Platform customers.
The Consent Order, entered by Texas Securities Commissioner John Morgan on July 27, found that Ameritrade's failures to send the disbursement notices were due to the manual process, and resulted in Ameritrade violating a State Securities Board rule requiring securities dealers to maintain and enforce procedures designed to achieve compliance with securities laws.
While Ameritrade did not automate its process of sending distribution notices for Institutional Platform accounts until August 2014, the Consent Order notes that Ameritrade was utilizing an automated process to deliver disbursement notices to accounts in its Retail division.
In addition to the fine paid to the General Revenue Fund, Ameritrade agreed to pay $100,000 to the Investor Protection Trust, a nonprofit organization that supports education efforts in Texas and other states.
The Ameritrade funds are expected to be used, in part, to benefit Texas investors by enhancing their understanding of documents received from brokerage firms, such as account agreements and periodic account statements.
"Registered firms have a responsibility to provide their customers with timely and accurate notice of account activity," said Texas Securities Commissioner John Morgan. "Customers also owe it to themselves to closely review these notifications when they are made so they can identify any unauthorized transactions or charges."