TD Ameritrade Hit With $600K FINRA Fine Over Options Trading Approvals

During the relevant period, TD Ameritrade’s systems “automatically compared information provided on an options application with information previously provided by the customer in an approved options application submitted in the past 60 days,” the order states.

However, prior to October 2022, the firm’s system “did not detect when the information supplied by a customer in a new options trading application materially differed from information the customer had previously provided to the fnm in prior rejected applications or in applications approved by the firm more than 60 days before the new application,” FINRA said.

Ignored Red Flags

TD Ameritrade approved customers for certain levels of options trading “despite red flags that the requested level of options trading was not appropriate for them,” the order states.

Between November 2019 and October 2022, TD Ameritrade approved certain customers to trade options “whose applications contained information that was materially inconsistent with other information those same customers had provided to the firm in prior applications,” FINRA said. “These customers’ applications contained red flags that a higher level of options trading may not have been appropriate.”

During this period, the firm “approved more than 1,288 customers for Full/Advanced options trading — which required customers to have three or more years of options trading experience pursuant to the firm’s eligibility criteria — despite previous statements from those customers in applications submitted within the prior six months that they had less than one year of experience,” the order explains.

In particular, the firm ”approved more than 496 customers who claimed they had more than six years of options trading experience despite previous applications from those customers submitted in the prior six months that stated these customers had less than one year of experience,” FINRA said.

TD said Monday in a statement shared with ThinkAdvisor that “Ameritrade addressed and remediated the matter in 2022. Options trading involves unique risks, and we prioritize diligence and prudence in our approval process to safeguard the interests of our clients and promote responsible trading practices.”