Finra fines TD Ameritrade for disclosures on callable securities

The Financial Industry Regulatory Authority (Finra) has fined TD Ameritrade Clearing US$500,000 for failing to disclose fully information about callable securities, including exchange-traded notes (ETNs) and preferred securities, to millions of customers over five years.

According to the regulator, the lack of disclosure from January 2016 to June 2021 for almost 10 million transactions omitted required statements that the securities were callable, meaning the issuer of the security could repurchase it by a specific date, which could affect the securities’ yield, particularly in regard to the ETNs.

TD Ameritrade self-reported the matter to Finra, according to the settlement, in which the company agreed to Finra’s findings without admission or denial. Charles Schwab Corp., which acquired TD Ameritrade in 2020, said the settlement resolves an ‘unintentional oversight about the placement of certain information on trade confirmations for a few securities’.

According to Finra, TD Ameritrade sent trade confirmations to clients who made more than 9.8 million purchases of the securities in question that failed to disclose the securities could be redeemed, and in the case of the ETNs, that a redemption before reaching full maturity could affect the yield of the securities.