SAN DIEGO (Legal Newsline) - A class action lawsuit filed against financial broker Scottrade on Thursday alleges that the company violated its financial duties by directing customer funds to trading venues that gave Scottrade kickbacks.
Nicholas Lewis, a resident of California, alleges Arizona-based Scottrade's automated kickback system selects venues that give the company the largest payment, which violates the duty of best execution.
Lewis is seeking class status for the suit and is seeking more than $5 million in damages. The kickbacks are allegedly received under a “maker-taker” model, according to the lawsuit. Venues pay brokers such as Scottrade a fee for sending them trading orders.
The suit alleges that brokers can make millions of dollars using this model and, unlike some brokers, Scottrade did not pass on these profits to its clients.
Lewis said he has been a client of Scottrade since August 2012. He alleges Scottrade has more than a dozen venues to send investments to, but chooses venues that gave the company the most kickbacks.
Lewis is represented by Brian J. Robbins of Robbins Arroyo, LLP, and Timothy G. Blood, of Blood Hurst & O'Readon, LLP.
United States District Court for the Southern District of California case number 3:14-cv-02926.