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Schwab to Pay $2.8M Over Suspicious Trades by Indie Advisors

July 5, 2018

Charles Schwab has agreed to pay a $2.8 million civil fine over SEC charges that it failed to report suspicious activity by 37 investment advisors, Reuters writes.

The regulator accused Schwab of failing to report to regulators transactions of at least $5,000 the firm suspected may have been illegal or put the company or its clients at risk, according to court documents filed in San Francisco federal court Monday cited by the newswire.

The 37 advisors, who were among 83 advisors Schwab terminated from its platform in 2012 and 2013, oversaw $840 million in at least 6,500 Schwab subaccounts, Reuters writes. Schwab only filed suspicious activity reports on 10 of the terminated advisors but was required to do so for 47, according to the newswire.

Among the suspicious transactions was a $295,000 wire to an advisor who purchased a home shortly thereafter, as well as trades by an advisor who used his clients’ passwords, Reuters writes.

A Schwab spokeswoman tells the newswire the firm looks forward to putting the matter behind it. The company neither admitted nor denied wrongdoing in agreeing to the settlement, according to Reuters.

The advisors in question were independent, in that they weren’t employed by or affiliated with Schwab, according to Bloomberg.

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The firm terminated the 83 advisors after determining they had violated its policies and could have put the firm at risk, the news service writes. A spokesman for the SEC couldn’t provide comment to Bloomberg, according to the news service.

By Alex Padalka
  • To read the Bloomberg article cited in this story, click here.
  • To read the Reuters article cited in this story, click here.