According to FINRA, Robert W. Baird & Co. Incorporated was censured, fined $150,000, and ordered to pay $266,481 plus interest in restitution for using a commission schedule that charged commissions on low-principal transactions that were not fair and reasonable.

The firm imposed a minimum commission of $100 plus a handling fee on all equity transactions. This minimum commission structure resulted in the firm charging at least $266,481 in unfair commissions, with charges ranging from over five percent to 93 percent of the transactions' principal value. While the firm generally flagged transactions where customers were charged over five percent of principal for excessive commission review, its supervisory system did not flag transactions for review when the firm charged its minimum $100 commission.

The firm's supervisory system was unreasonable because when establishing its commission schedule and setting commissions, it did not appropriately consider the factors set forth in FINRA Rule 2121.01 for transactions subject to the minimum commission. These factors include the type of security, its availability, the price of the security, the amount of money involved, the expense of executing the order, and the value of services rendered by the broker-dealer.

FINRA rules require that commissions be fair and reasonable, taking into account all relevant circumstances. Excessive commissions, particularly on small transactions, can severely erode investment returns and harm customers who may not realize the disproportionate cost of their trades. A commission representing 93 percent of a transaction's value is clearly excessive and inconsistent with fair dealing principles. Investors should always understand the commission structure before trading and calculate commissions as a percentage of their trade size. Small trades at firms with high minimum commissions can be particularly costly. Investors should compare commission schedules across firms and consider whether a firm's commission structure aligns with their typical trading patterns and account size. Transparency in commission charges is essential for investors to evaluate the true cost of their investment activities.