FINRA (Financial Industry Regulatory Authority) recently raised an issue concerning excessive postage and handling fees being charged by a number of small and mid-sized broker-dealers. In his speech to the attendees of FINRA’s Annual Conference, FINRA Chairman and CEO Richard Ketchum said this:
“We are taking a close look at excess charges for routine services, which some firms appear to be treating as an additional de facto commission. Such charges include postage and handling charges for particular trades. You can expect to see some enforcement activity in this area with respect to particularly egregious examples.”
Postage and handling fees charged by broker-dealers can range from a few dollars to $100 per transaction. There has been an increase in postage and handling fees by many broker-dealers since the market collapse in 2008 which left firms desperate for profits.
The postage and handling fee is often charged per transaction and is in addition to commissions and/or markup and markdown. NASD Rule 2430 requires that any charges to a customer “shall be reasonable.” So, for example, when actual postage and handling incurred is $10, but the broker-dealer charges $100 the customer, the regulators and customers may very well argue that such a charge is unreasonable.
State securities regulators are taking action against various broker-dealers that charged these unreasonable fees. On April 15, 2011 the Connecticut Banking Commissioner entered an Order to Cease and Desist and Order to Make Restitution against a mid-sized Fort Lauderdale, Florida based broker-dealer. The action directed the firm to cease and desist from regulatory violations and to reimburse Connecticut customer the difference between the transaction “Handling Fee” each customer paid and the actual amount of the firm’s ticket, clearing and postage costs.
If you were a customer of a broker-dealer that charged you a questionable postage and handling fee, contact the law firm of Blum Law Group for a free consultation. Blum Law Group is a national recognized securities litigation and arbitration law firm which represents investors worldwide, typically on a contingency fee basis.