Charles Schwab Fined $175,000 by FINRA Over Fractional Share Trade Reporting Failures | LeapRate
Charles Schwab has been censured and fined $175,000 by the Financial Industry Regulatory Authority over failures to report millions of fractional share transactions.
According to a Letter of Acceptance, Waiver, and Consent, FINRA said that between January 2018 and May 2025, Schwab failed to report or report in a timely manner approximately 2.8 million fractional share transactions to the relevant trade reporting facilities, in breach of its rules.
The firm is also said to have inaccurately reported around 690,000 fractional share transactions between July 2022 and July 2023.
The regulator noted that many of the unreported trades resulted from Schwab liquidating fractional shares in a principal capacity in connection with customer account transfers made through a service that does not support transfers of fractional shares.
The firm also failed to pay the regulatory transaction fees associated with those trades.
FINRA said the inaccurate reports, which carried incorrect execution times and omitted a required prior reference price modifier, were an unintended result of a system enhancement that the firm corrected in July 2023. Late reports were primarily caused by system latency around market open during periods of increased volume and volatility.
The regulator also found that from January 2018 through May 2025, Schwab failed to establish and maintain a supervisory system reasonably designed to comply with its trade reporting obligations.
Schwab consented to the findings without admitting or denying them. In addition to the censure and fine, the firm agreed to pay the outstanding regulatory transaction fees.
