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Industry Spotlight > Clearing and Custodial Firms

TD Ameritrade Clearing Hit With $500K Fine

By Melanie Waddell

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TD Ameritrade Clearing was hit with a $500,000 fine by the Financial Industry Regulatory Authority for failing to disclose information about callable securities — including the sale of exchange traded notes.

According to the order, between January 2016 and June 2021, TDAC “sent its customers confirmations for approximately 9.8 million transactions that omitted required disclosures regarding its customers’ purchases” of exchange traded notes (ETNs) and preferred securities.

In particular, the confirmations “failed to disclose that the securities were callable and, with regard to the ETNs, that early redemption could affect the securities’ yield,” the order states.

As a result, TDAC violated Exchange Act Rule 10b-10(a)(4), promulgated under Section l0(b) of the Securities Exchange Act of 1934, and FINRA Rules 2232 and 2010.

TDAC relied instead “upon general language within the confirmations it sent to customers that disclosed that ‘[i]f the transaction involves callable securities, the call features could affect yield,’” the FINRA order states. “Complete information will be provided upon request.”

As a result, “the confirmations did not disclose that the ETNs and preferred securities in question were in fact callable, and with respect to the ETNs purchased by the firm’s customers, that early redemption could affect the securities’ yields,” the order explains.

In February 2021, TDAC “self-reported the above-described failures to FINRA and voluntarily employed corrective action, including notifying its customers that the securities in question were callable, and with respect to the ETNs purchased by the firm’s customers, that early redemption could affect the securities’ yields,” FINRA said.

Melanie Waddell

@Think_MelanieW

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