The Financial Industry Regulatory Authority (FINRA) has ordered American Portfolios Financial Services (APFS) to pay $4.6 million in restitution to customers and a $550,000 fine after finding that the firm miscalculated fees and retained undisclosed interest from client funds in its bank deposit program.

The firm will pay $4.6 million in restitution to customers and a $550,000 fine, closing a five-year chapter of compliance lapses.

According to the regulator, between April 2018 and September 2022, APFS inaccurately told customers how it determined fees under its bank deposit program. The system automatically moved unused cash from brokerage accounts into insured, interest-bearing bank accounts.

Misstated Fees and Hidden Earnings

Instead of using the disclosed formula based on the Federal Funds Target rate, APFS adjusted yields using competitive benchmarks and kept the remaining interest paid by partner banks. This resulted in over $3 million in fees beyond what clients were led to expect.

• 72% of Social Media Followers and Half of US Retail Investors Open to Risky Offers: FINRA Foundation
• FINRA-Registered Broker-Dealer Equilibrium Capital to Be Acquired by GSR
• FINRA's Proposal to Scrap $25K Day Trading Minimum: Fair Markets or Riskier Bets?

FINRA said the firm also retained an additional $1.25 million in surplus interest when rate changes created excess proceeds—money it failed to disclose. Those amounts were incorrectly reported as revenue in APFS’s net capital calculations, causing inaccurate regulatory filings.

You may also like: Unregistered Crypto Mining in Russia May Soon Come With Up to 2 Years of Forced Labor

Besides that, the regulator found that APFS lacked systems to properly oversee the bank deposit program or to ensure fee accuracy and transparency. From 2018 through May 2023, the firm operated without sufficient written procedures to verify that customer disclosures reflected the real fee structure.

Ownership Changes and Restitution Efforts

American Portfolios was acquired by Osaic Holdings in late 2022 and merged into Osaic Wealth in 2024. According to FINRA, Osaic cooperated during the investigation, helped calculate restitution, and began compensating affected customers before the settlement was finalized.

APFS disclosed its underpayments to FINRA in October 2022 and switched to the proper fee calculation method soon after.

Though APFS settled the matter without admitting or denying the findings, the case highlighted ongoing regulatory pressure on firms to maintain transparency in cash management programs and to ensure customers receive accurate information about returns on idle funds.