Consent Order (TD Ameritrade, Inc., Respondent Case No. 25-20764)

State of Maine
Office of Securities
121 State House Station
Augusta, Maine 04333-0121

I.

PRELIMINARY STATEMENT

Pursuant to the authority granted to the Maine Securities Administrator ("Administrator") under the Maine Uniform Securities Act, 32 M.R.S. § 16101 et seq. ("the Act"), and after investigation, careful review, and due consideration of the facts and statutory provisions set forth below, the Administrator hereby finds that there is good cause, and it is in the public interest to enter into this Consent Order ("Order") with TD Ameritrade, Inc. ("TD Ameritrade"), which resolves any and all issues in controversy regarding the specific conduct described herein on the terms set forth in this Order. As the result of a coordinated investigation, the Administrator concluded that TD Ameritrade charged commissions in excess of 5% on certain small principal equity transactions. Nationwide, TD Ameritrade charged a commission in excess of 5% on approximately 84,618 equity transactions from June 30, 2018 to June 30, 2023 ("Relevant Time Period"), totaling $913,223. In Maine, TD Ameritrade charged a commission in excess of 5% on approximately 295 equity transactions during the Relevant Time Period, totaling $4,404.10. TD Ameritrade in full settlement of these matters neither admits nor denies the Statement of Facts as set forth in Section IV, and neither admits nor denies the Conclusions of Law set out in Section V.

II.

JURISDICTION

2. The Administrator has jurisdiction over matters relating to securities pursuant to the Act.
3. This Order is entered in accordance with 32 M.R.S. § 16412.
4. The acts and practices that are the subject of this Order occurred while TD Ameritrade was licensed as a broker-dealer in Maine.

5. III.

   RESPONDENT

   
   
   
6. TD Ameritrade was a broker-dealer formerly licensed in Maine with a main address of 200 South 108th Avenue, Omaha, Nebraska 68154. TD Ameritrade is identified by Financial Industry Regulatory Authority ("FINRA") CRD No. 7870. TD Ameritrade has filed a Form BDW, and the Securities and Exchange Commission has withdrawn its registration. IV. STATEMENT OF FACTS A. TD Ameritrade's Minimum Commission Practices for Equity Transactions Failed to Ensure Transactions Were Executed at a Fair and Reasonable Price 5. During the Relevant Time Period, TD Ameritrade executed 295 equity transactions in Maine which included an unreasonable commission for services performed (i.e., in excess of 5% of the principal trade amount), totaling $4,404.10. 6. During the Relevant Time Period, TD Ameritrade charged a fixed minimum commission for broker-assisted trades - i.e., those not placed directly online by customers (the Minimum Equity Commission). 7. The Act prohibits TD Ameritrade from charging unreasonable commissions for services performed. 8. FINRA Rule 2121 Supplementary Material .01 (Rule 2121.01) sets a guideline of five percent for determining whether a commission is unfair or unreasonable. However, the 5% Policy is a guide, not a rule. A commission of five percent or even less may be considered unfair or unreasonable, and a commission of five percent or more may be considered fair or reasonable, depending on the various circumstances. B. TD Ameritrade Did Not Reasonably Supervise Transactions Which Applied the Minimum Equity Commission 9. TD Ameritrade did not reasonably supervise transactions that included the Minimum Equity Commission charge to ensure that TD Ameritrade charged its customers a reasonable commission. 10. TD Ameritrades policies and procedures contemplated review of commissions as part of normal supervisory review processes. 11. Despite these systems, TD Ameritrades surveillance policies failed to reasonably detect and correct unreasonable commission charges, specifically as it relates to the Minimum Equity Commission. 12. As a result, TD Ameritrade failed to adequately supervise small principal equity transactions where the Minimum Equity Commission was in excess of 5%. V. CONCLUSIONS OF LAW 13. The preceding paragraphs are incorporated by reference as though set forth verbatim herein. 14. Pursuant to 32 M.R.S. 16412(4)(I), it is a violation of the Act for a licensed broker-dealer firm to fail to reasonably supervise its agents activities. In particular, Maine Office of Securities Rule Chapter 504 7(1)-(2) requires a licensed broker-dealer to establish, maintain and enforce systems and written procedures to supervise the types of business in which it engages and the activities of its agents and other persons. 15. By failing to meet the supervision requirements of Rule Chapter 504 7(1)-(2), TD Ameritrades acts and practices, as described above, violated 32 M.R.S. 16412(4)(I). VI. ORDER 16. On the basis of the Statement of Facts, Conclusions of Law, and TD Ameritrades consent to the entry of this Order, IT IS HEREBY ORDERED: A. TD Ameritrade is censured by the Administrator; B. TD Ameritrade shall provide restitution to the affected Maine customers up to a total amount of $5,650.10, including $4,404.10 in commissions on certain small principal equity transactions that exceeded 5% of the principal trade amount during the Relevant Time Period, plus $1,246.00 in interest at the rate of 6% from the date of the transactions to June 3, 2025. TD Ameritrade shall provide restitution within one hundred twenty (120) days of execution of this Order; C. Restitution shall be in the form of a check for all former customers; D. TD Ameritrade shall provide a notice of restitution to customers on terms not unacceptable to Massachusetts, Montana, Missouri, Alabama, Washington, Texas, and Iowa (the Multi-State Group) (Notice Letter). The Notice Letter shall be sent prior to or with the distribution of any restitution. Within forty-five (45) days of the mailing of the Notice Letter, Respondent shall provide the Administrator with a list of all Maine residents for whom Respondent receives a Notice Letter as returned to sender. To the extent the Administrator has access to different address information, Respondent shall mail a second Notice Letter to each Maine resident within thirty (30) days of the Administrator providing such different address; E. TD Ameritrade shall prepare, and submit to the Administrator, a report detailing the restitution paid pursuant to the Order, which shall include dates, amounts, and methods of the transfer of funds for all restitution payments, within forty-five (45) days of completion of distribution of restitution; F. TD Ameritrade shall pay an administrative fine in the amount of $15,000 to the State of Maine within fifteen (15) days following the date of entry of the Order. Payment shall be made by check made payable to Treasurer, State of Maine and mailed to the Maine Office of Securities, 121 State House Station, Augusta, Maine 04333-0121, or by electronic means as agreed by the Administrator; G. TD Ameritrade shall not claim, assert, or apply for a tax deduction or tax credit with regard to any state, federal or local tax for any amount that TD Ameritrade shall pay pursuant to the Order; H. TD Ameritrade shall not seek or accept, directly or indirectly, reimbursement or indemnification, including, but not limited to, any payments made pursuant to any insurance policy, with regard to any amount that TD Ameritrade shall pay pursuant to the Order; I. If TD Ameritrade is the subject of a voluntary or involuntary bankruptcy petition under Title 11 of the United States Code within three hundred sixty-five (365) days of the entry of the Order, TD Ameritrade shall provide written notice to the Administrator within five (5) days of the date of the petition; J. Any fine, penalty, and/or money that TD Ameritrade shall pay in accordance with the Order is intended by TD Ameritrade and the Administrator to be a contemporaneous exchange for new value given to TD Ameritrade pursuant to 11 U.S.C. 547(c)(1)(A) and is, in fact, a substantially contemporaneous exchange pursuant to 11 U.S.C. 547(c)(1)(B); K. If TD Ameritrade fails to materially comply with any of the terms set forth in the Order, the Administrator may declare this Order null and void in whole or in part: and L. For good cause shown, the Administrator may extend any of the procedural dates set forth above. TD Ameritrade shall make any requests for extensions of the procedural dates set forth above in writing to the Administrator. VII. WAIVER 17. TD Ameritrade hereby waives all rights to contest this Order, including, but not limited to, (A) the right to contest whether the Order is fair, reasonable, and/or in the public interest, (B) the right to contest the Orders findings of fact, and (C) the right to contest the Orders conclusions of law. TD Ameritrade further waives its right to a hearing and any other procedural rights provided by the Act and the Maine Administrative Procedure Act, 5 M.R.S. 8001 et seq. VIII. NO DISQUALIFICATION 18. This Order waives any disqualification in the Act, or rules or regulations thereunder, including any disqualification from relying upon the licensing exemptions or safe harbor provisions to which TD Ameritrade may be subject. The Order is not intended to be a final order based upon violations of the Act that prohibit fraudulent, manipulative, or deceptive conduct. The Order is not intended to form the basis of any disqualifications under Section 3(a)(39) of the Securities Exchange Act of 1934; or Rules 504(b)(3) and 506(d)(1) of Regulation D, Rule 262(a) of Regulation A and Rule 503(a) of Regulation CF under the Securities Act of 1933. The Order is not intended to form the basis of disqualification under the FINRA rules prohibiting continuance in membership absent the filing of a MC-400A application or disqualification under SRO rules prohibiting continuance in membership. The Order is not intended to form a basis of a disqualification under 204(a)(2) of the Uniform Securities Act of 1956 or Section 412(d) of the Uniform Securities Act of 2002. Except in an action by the Administrator to enforce the obligations of the Order, any acts performed or documents executed in furtherance of the Order: (a) may not be deemed or used as an admission of, or evidence of, the validity of any alleged wrongdoing, liability, or lack of any wrongdoing or liability; or (b) may not be deemed or used as an admission of; or evidence of, any such alleged fault or omission of TD Ameritrade in any civil, criminal, arbitration, or administrative proceeding in any court, administrative agency, or tribunal. 19. This Order shall be binding upon TD Ameritrade with respect to all conduct subject to the provisions above and all future obligations, responsibilities, undertakings, commitments, limitations, restrictions, events, and conditions. 20. This Order and any dispute related thereto shall be construed and enforced in accordance with, and governed by, the laws of Maine without regard to any choice of law principles.

   TD AMERITRADE, INC. by:

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   James Kostulias Managing Director Head of Trading Services

   Dated: ________________________________