Charles Schwab has been censured and fined $175,000 by the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization overseeing US broker-dealers, following failures to report millions of fractional share transactions. Accurate and timely trade reporting feeds the consolidated audit trail and public tape data that regulators and market participants rely on to monitor markets, making reporting lapses a recurring focus of FINRA enforcement even when no customer harm is alleged.

Under a Letter of Acceptance, Waiver, and Consent — a standard FINRA settlement mechanism in which a firm consents to sanctions without admitting or denying the findings — FINRA stated that between January 2018 and May 2025, Schwab failed to report, or failed to report in a timely manner, approximately 2.8 million fractional share transactions to the relevant trade reporting facilities, in breach of FINRA rules.

In addition, the firm is said to have inaccurately reported around 690,000 fractional share transactions between July 2022 and July 2023.

FINRA noted that many of the unreported trades stemmed from Schwab liquidating fractional shares in a principal capacity in connection with customer account transfers made through a service that does not support the transfer of fractional shares. Because fractional positions cannot move through that transfer process, firms typically liquidate them and report the resulting trades — a step Schwab failed to carry out in these instances, and the firm also failed to pay the regulatory transaction fees associated with those trades.

According to FINRA, the inaccurate reports — which carried incorrect execution times and omitted a required prior reference price modifier — were an unintended consequence of a system enhancement that the firm corrected in July 2023. Late reports were primarily attributed to system latency around market open during periods of increased trading volume and volatility.

The regulator further found that from January 2018 through May 2025, Schwab failed to establish and maintain a supervisory system reasonably designed to ensure compliance with its trade reporting obligations, a finding that typically weighs heavily in such settlements because firms are required to supervise not only their business conduct but the systems supporting it.

Schwab consented to the findings without admitting or denying them. Beyond the censure and fine, the firm agreed to pay the outstanding regulatory transaction fees. The case is the latest in a series of FINRA actions against major brokerages over trade reporting and supervisory lapses, an area regulators have scrutinized as retail trading volume and fractional share usage have grown.