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Charles Schwab & Co. Inc. Fined $95,000 by TSSB

Charles Schwab & Co. Inc. was reprimanded and agreed to pay a $95,000 fine for failing to verify that certain individuals with powers of attorney in client accounts were required to be registered as investment advisers.

The reprimand and fine are part of a Consent Order entered by Securities Commissioner John Morgan on Sept. 22. Schwab will pay the fine to the General Fund of the State of Texas.

The order followed an investigation by the staff of the State Securities Board into Schwab’s procedures for monitoring the registration status of persons authorized by clients as a limited power of attorney or full power of attorney (POA). Staff investigated Schwab’s procedures from January 2010 to January 2016.

Schwab requires persons authorized as a limited or full POA to state whether they are receiving compensation for any investment advice rendered to clients. Receiving compensation for advisory services may require registration under state and federal law unless the person with a POA is covered by an exemption from registration.

According to the order, Schwab identified certain persons who had power of attorney authorizations in Texas and who appeared to be rendering investment advice for compensation, but were not registered and did not qualify for an exemption from registration.

In 2012 Schwab implemented new procedures to identify persons with POA authorizations who indicated they are either being compensated for investment advice or are registered investment advisers.

Schwab flagged these individuals for review and asked them to explain their registration status, but it did not consistently remove POA authorizations from the flagged individuals when they failed to provide a timely explanation of their registration status.

Schwab has instituted revised procedures designed to ensure that persons with POA authorizations are complying the registration requirements of securities laws.

As part of the order, Schwab will also pay $30,000 to the Investor Protection Trust, a nonprofit organization that supports investor education efforts in Texas and other states.

Info from TSSB

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