Robert W. Baird & Co. to Pay More Than $650K for Reg BI Violations

The Financial Industry Regulatory Authority announced that it has fined independent, multinational investment firm Robert W. Baird & Co. Incorporated, as successor-in-interest to retail brokerage Hefren-Tillotson Inc., $100,000 for violating Regulation Best Interest, or Reg BI, and certain FINRA rules.

FINRA stated that, from June 30, 2020, through Sept. 29, 2022, Hefren-Tillotson’s representatives recommended that 432 customers open “portfolio review” accounts, which charged customers commissions plus an extra fee in exchange for certain services, such as financial planning, that these customers were already receiving in connection with other accounts. These customers paid $557,830.64 in unnecessary fees as a result of these recommendations.

During that same time period, FINRA found that Hefren-Tillotson failed to establish and maintain a supervisory system, including written supervisory procedures, reasonably designed to achieve compliance with various components, including the Compliance Obligation, of Reg BI with respect to account-type recommendations. As a result, Baird, as successor-in-interest to Hefren-Tillotson, violated Reg BI and FINRA Rules 3110 and 2010.

Reg BI is a set of rules that require broker-dealers and their associated persons to act in the best interest of their retail customers when making recommendations. Reg BI’s Compliance Obligation requires broker-dealers to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance with Reg BI.

FINRA Rule 3110 requires member firms to establish, maintain, and enforce a supervisory system, including written procedures, to supervise the activities of each associated person that is reasonably designed to achieve compliance with applicable securities laws, regulations, and FINRA rules. A violation of Rule 3110 is also a violation of Rule 2010, which requires associated persons to observe high standards of commercial honor in their business conduct.

As a result of these oversights, Baird was censured, fined $100,000 and has agreed to pay $557,830.64 in restitution.

Baird was similarly ordered to pay more than $500,000 in restitution in 2023 for excess charges and fees.

Founded in 1919 in Milwaukee, Robert W. Baird & Co. is an employee-owned wealth management, capital markets, asset management, and private equity firm. In October 2022, Hefren-Tillotson merged with Robert W. Baird & Co. Incorporated, with Baird being the surviving entity and acquiring Hefren-Tillotson’s retail brokerage business.

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