Massachusetts Charges Scottrade over Retirement Account Sales Contests
The state of Massachusetts on Thursday accused discount broker-dealer Scottrade Inc. of knowingly violating the Department of Labor’s fiduciary rule by conducting sales contests after the rule took partial effect last June.
Scottrade, which TD Ameritrade bought in September 2017, paid awards and incentives tied in part to retirement assets in at least two sales contents, violating the “impartial conduct” standard that the firm adopted to comply with the fiduciary rule, Secretary of the Commonwealth William Galvin charged.
“Despite the efforts in Washington to kill the fiduciary rule, the impartial conduct provision remains in place,” Galvin said in a prepared statement. “If the Department of Labor will not enforce its own laws and rules, then the states must do what they can to protect retirees from firms who believe they can play with people’s life savings by conducting sophomoric contests.”
TD Ameritrade as a matter of practice does not comment on pending regulatory or legal complaints, spokeswoman Kim Hillyer wrote in an e-mail.
Several states, including Nevada, have been preparing tougher fiduciary standards for registered investment advisers and brokers as the Trump administration has delayed the effective dates of parts the Labor Department’s customer-protection rules regarding retirement accounts.
Galvin, an activist regulator who earlier this month said the state was considering requiring investment advisers to provide detailed fee tables to customers and prospects, said the state securities division’s complaint alleges that Scottrade’s “dishonest and unethical activity” not only violated the impartial conduct standard but demonstrated a failure to supervise.
The complaint seeks a cease and desist order, censure, and an unspecified administrative fine.
Scottrade continues to operate as an autonomous broker-dealer pending conversion of all its customer accounts to TD Ameritrade’s systems. When that occurs within a few weeks, the Scottrade brand will no longer be used, Hillyer said.