Massachusetts' Securities Division charged Scottrade, Inc. for violations of the federal fiduciary duty rule's impartial conduct provision, alleging that the firm engaged in dishonest and unethical practices in sales involving retirement account clients, and thus neglected the duty to put its customers' interests ahead of its own.
Claiming that Scottrade failed to act in good faith to comply with the US Department of Labor's Fiduciary Rule, MA Enforcement wrote that the firm ran nationwide sales contests from 2015 to 2017, offering prize money and raffle tickets as incentive to brokers and financial advisers who sold the most products, including securities.
For example, qualification for one raffle required Scottrade agents to make 100 cold-calls and one referral to the Scottrade Guidance Solutions Group.
Investigators found that as part of the contest, Scottrade agents across the firm's entire network cold-called customers and failed to take any meaningful steps to place retiree and retirement account owners' interests ahead of the salespersons' drive to rack up numbers for the company-wide contests.
Digging further, the regulator determined that even though Scottrade adopted a rule to exclude retirement account clients from the sales contests, the firm failed to enforce the provision across its nationwide network; thus, Enforcement charged Scottrade with failure to supervise.
FINRA previously fined Scottrade several million dollars for supervisory failures related to its e-mail and records system, and monitoring for wire transfers to third-party accounts, which exceeded $880 million during the period in which FINRA alleged Scottrade's supervisory system was deficient.
A Scottrade representative told Massachusetts investigators that the 2015-17 Quarterly Sales Contests were not disclosed to clients, nor were the prizes available to Scottrade representatives who hit certain target numbers. The series of call nights allegedly occurred, in part, to increase transactional activity ahead of an upcoming merger with TD Ameritrade.
If you have invested with Scottrade, Inc., or with any broker, financial adviser, or firm who has cold-called or otherwise solicited a harmful securities product that was unsuitable given your investment objectives or risk tolerance level, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.