The U.S. Securities and Exchange Commission (SEC) recently fined Charles Schwab & Co., Inc. $2.8 million for failing to report a series of suspicious transactions by independent investment advisors it stopped from using the company to handle client accounts.
Under the Bank Secrecy Act, all broker-dealers are required to report any such suspicious transactions that occur through their firms, which helps federal agencies uncover possible violations of securities laws.
According to the SEC complaint, Schwab terminated 83 independent investment advisors in 2012 and 2013 for engaging in practices that violated its own internal policies. The SEC alleges at least 47 of those advisors had engaged in transactions Schwab either knew, suspected or had reason to suspect were suspicious and would therefore require reporting under the Bank Secrecy Act. Schwab allegedly did not file reports on suspicious transactions of 37 of those advisors.
Some of the alleged suspicious activities included charging client accounts exorbitant advisory fees, posing as clients to confirm or effect transactions in the client account, executing client trades without being registered properly as an advisor and undisclosed conflicts of interest.
The complaint also alleges Schwab did not file reports when the terminated advisor was suspected of misuse of client funds and the client had not submitted a complaint. The settlement allows Schwab to avoid admitting liability or denying its culpability.
If you work for a financial institution you believe has violated the Bank Secrecy Act or committed other forms of securities law violations, consult a trusted Dallas whistleblower lawyer at Kardell Law Group. You will learn how you can report this wrongdoing and potentially be compensated for the information you provide.