DFPI Cracks Down on Financial Firms Charging Excessive Commissions to Customers

What You Need to Know: DFPI orders companies to refund $1.3 million to Californians for excessive commissions.

SACRAMENTO - As part of its robust efforts to protect Californians from irresponsible business practices, the Department of Financial Protection and Innovation (DFPI) today announced that five financial companies, some of whom are major household names, must return more than $1.3 million to California customers who were charged excessive commissions. A multi-state investigation found that financial broker-dealer firms Edward Jones, LPL Financial LLC, RBC Capital Markets LLC, TD Ameritrade, and Stifel, Nicolaus & Company Inc. collectively charged approximately $19 million nationwide in excessive commissions to customers who made small-dollar transactions.

In California, state securities laws prohibit firms from charging unreasonable commissions to clients. In addition, the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization that oversees brokerage firms, suggests that a markup limit of 5 percent or less is fair or reasonable. However, in the five years covered by the investigation, the DFPI found tens of thousands of transactions where the commissions exceeded 5 percent. California has laws requiring financial companies to maintain proper supervisory systems over their securities activities.

The violations were discovered when Navitas applied for a CFL license in May 2023. During the application review process, the DFPI uncovered that the company had previously: (1) engaged in unlicensed lending; (2) paid compensation to unlicensed and nonexempt brokers; and 3) charged borrowers unlawful interest.

"California will not tolerate companies gobbling up consumers' hard-earned money with exorbitant commissions. These firms are supposed to help people invest and manage their money, but these excessive fees make it harder for people to get ahead financially. It is particularly egregious when consumers are making small, low-dollar transactions," said DFPI Commissioner KC Mohseni.

These enforcement actions are part of an ongoing DFPI effort to help ensure fair and transparent pricing for California consumers. The DFPI is committed to reducing hidden 'junk' fees, excessive commissions, and other opaque charges that appear to prioritize sales over clients' results. These regrettable practices erode consumer trust in the financial industry.

The DFPI joined a coalition of multiple states, as part of the North American Securities Administrators Association (NASAA), to investigate the five firms. To settle the charges, each firm has agreed to refund California customers the amount listed below, plus 6 percent interest.

In addition, each firm listed above must change its policies and procedures to include measures that will prevent a recurrence of charging customers excessive fees. This excludes TD Ameritrade, which has since been acquired by Charles Schwab. The firms will collectively pay the DFPI a penalty of $175,000.

The DFPI expects any person offering securities, a lender, or any other financial services provider that operates in California to comply with California's financial laws. Consumers who believe they have been subject to excessive commissions or suspect a company of unlawful, unfair, deceptive, or abusive practices may file a complaint with the DFPI online (dfpi.ca.gov/submit-a-complaint) or call toll-free at (866) 275-2677.

The Department of Financial Protection and Innovation protects consumers, regulates financial services, and fosters responsible innovation. DFPI protects consumers by establishing and enforcing financial regulations that promote transparency and accountability. We empower Californians to access a fair and equitable financial marketplace through education and by preventing potential risks, fraud, and abuse. Learn more at dfpi.ca.gov.