Schwab to pay $3.8 million over outside advisor’s complex recommendations

Charles Schwab and TD Ameritrade have been ordered to pay nearly $4 million over an affiliated broker’s recommendation of complex investments, in a case with echoes of a series of large penalties against Stifel,

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Charles Schwab and TD Ameritrade, which was acquired by Schwab in 2020, were ordered this week by a Financial Industry Regulatory Authority arbitration panel to pay 15 investors just over $3.83 million over claims that the firms “substantially concentrated their accounts in inappropriate holdings.” The investors’ lawyer, Michael Bixby of Bixby Law in Pensacola, Florida, said the investments stemmed from recommendations by an outside registered investment advisor named Mario Payne and ultimately cost his clients millions in retirement savings.

Payne’s firm, TOAMS Financial in Jacksonville, Florida, had used Schwab and TD Ameritrade as custodians to hold investors’ assets for safekeeping and provide recordkeeping and transaction-related services. Bixby said he argued that Schwab and TD Ameritrade had a duty to prevent his clients from having their savings concentrated in investments that were demonstrably unsuitable.

“If the firms are doing their jobs, they should be looking at this a lot more, vetting it and saying, ‘Hey, should this person really be in this?'” said Bixby, who is also the president of the Public Investors Advocate Bar Association. “You know, this 66-year-old retired teacher, where this is almost all of their net worth, do you really approve this for that person?”

A spokesperson for Charles Schwab said, “We empathize with these investors, but the decision was legally wrong.

“All investment choices were made by the claimants and their independent financial advisor and not Schwab, whose sole role was as a custodian of the accounts,” the spokesperson added. 

Charles Schwab provides custodial and similar services to more than 16,000 independent advisory firms.

READ MORE: Stifel vows to keep fighting $133M arb award from now-barred broker

Stifel’s recent woes with an advisor recommending ‘structured notes’

Bixby said the case bears some similarities to the series of hefty penalties FINRA arbitration panels have hit Stifel with over the past year and a half largely over one of its former broker’s recommendations of complex products known as structured notes. Stifel’s tab for penalties and settlements stemming from investment advice doled out by Chuck Roberts, a now-barred broker who had run CR Wealth Management Group in Miami and New York, is approaching $200 million.

The structured notes Roberts was recommending are a type of debt security that can offer high returns but also often carry substantial risks and fees. Payne — in the similar case involving Charles Schwab and TD Ameritrade — was likewise touting complex instruments like structured products, nontraditional exchange-traded funds, or ETFs, and leveraged ETFs.

“It’s a similar type of thing where there’s a lot of different people who had the same thing happen to them,” Bixby said. “There’s a pretty significant pattern.”

Bixby said his clients are mostly former teachers who had retired from the Duval County School District in Jacksonville, Florida. Many of them, he said, had entrusted Payne with their life savings.

Payne did not return requests for comment. His BrokerCheck page lists six pending customer complaints against him. All of them were logged in 2024 and make allegations concerning a “high-risk, illiquid, complex, and unsuitable investment strategy.” (Two earlier complaints were both denied.)

Payne’s goal of ‘Making Investing Simple’

The more than $3.83 million in penalties Schwab and TD Ameritrade have been ordered to pay consists of roughly $3.5 million in compensatory damages and just over $500,000 in prejudgment interest.

Bixby had initially calculated that the damages to his clients fell somewhere between nearly $2.5 million and just over $4.8 million. In handing down its award, the FINRA arbitration panel denied Bixby’s request for punitive damages, treble damages and attorney’s fees.

Payne started his career at Edward Jones in 2007 and moved to Raymond James in 2013, the same year he started TOAMS Financial. He ceased to be registered with FINRA as a broker in 2019 and now only maintains a registration as an advisor through the Securities and Exchange Commission.

TOAMS Financial’s website says the firm’s name stands for “Tithe Offering Alms Means Stewardship.” It says Payne has built the firm on the “premise of helping clients while ‘Making Investing Simple.'”