CLAYTON, Mo. (CN) – Scottrade illegally collected extra fees on day trades, a class action claims in St. Louis County Court.
Lead plaintiff Irina Borzakovskaia says Scottrade let its pattern day-trading customers trade without regard to the equity in their account, in violation of Financial Industry Regulatory Authority (FINRA) rules.
“By failing to follow FINRA rules plaintiffs were harmed and/or Scottrade was otherwise enriched by collecting fees on trades that should not have been allowed,” the complaint states.
The SEC defines a pattern day trader as one who executes four or more day trades in five business days in a margin account, if the number of day trades are more than 6 percent of the customer’s total trading activity for that same five-day period.
FINRA rules contain minimum equity requirements and limit buying power for pattern day traders. Borzakovskaia and two other named plaintiffs say Scottrade allowed them to make trades without regard to those rules from 2008 to Jan. 8, 2010.
The class consists of all Scottrade customers who engaged in pattern day trading who were allowed to make trades in violation of FINRA rules. They seek disgorgement of Scottrade’s profits from the trading fees and actual and punitive damages for negligence, breach of fiduciary duty, breach of contract, unjust enrichment and violations of the Missouri Merchandising Practices Act.
They are represented by Julia Lutovich of St. Louis.
Scottrade and four Scottrade officials are named as defendants.
Plaintiffs are represented by Julia Lutovich of St. Louis and Jack Spooner of Clayton.