Charles Schwab was charged Wednesday by Massachusetts securities regulator William Galvin for unethical and deceptive practices that allowed a third-party investment advisor to continue to collect advisory fees from Schwab customers' accounts for years after his registration had lapsed.
According to an administrative complaint filed by the Massachusetts Securities Division, James Patrick O'Connell of Gloucester, a former investment advisor representative, has collected at least $125,000 in investment advisory fees since his registration last lapsed in 2014.
O'Connell's alleged illegal activities were discovered while investigating a complaint against O'Connell for exploitation of senior citizens.
Schwab removed O'Connell from its platform in 2012 for allowing his registration to lapse for nearly two years, which also resulted in a reprimand from the Securities Division.
"Despite this removal, Schwab took no steps to monitor customer accounts for further payments to O'Connell, who collected at least $46,000 in investment fees from Schwab brokerage accounts over a period of more than six years while remaining unregistered," the complaint states.
O'Connell continued to make recommendations to clients and collect fees from their accounts, including recommendations that were unsuitable.
According to the complaint, O'Connell issued blanket recommendations without respect to individual client needs and over-concentrated portfolios in global communication infrastructure companies.
