The Connecticut Department of Banking, Securities and Business Investments Division's Authority

Connecticut Attorney General William Tong has been active in financial consumer protection and could pursue PFOF claims under the Connecticut Unfair Trade Practices Act (CUTPA). The Connecticut Banking Department has securities enforcement authority under C.G.S. §36b-2.

The Harm Requiring Regulatory Response

Connecticut is home to numerous hedge funds and sophisticated investors in Greenwich and Stamford — but retail investors statewide use the same discount brokers and are subject to the same PFOF practices. The irony is that Connecticut's wealthy financial professionals understand PFOF's harm while ordinary residents are unprotected.

What State Regulators Should Do

The Connecticut Department of Banking, Securities and Business Investments Division, in coordination with the Connecticut Attorney General's office, should:

• Open an investigation into whether broker-dealers serving Connecticut residents are meeting best execution obligations under state securities law
• Issue a formal inquiry to major PFOF-dependent brokers about their routing arrangements with Citadel Securities and the execution quality they achieve for Connecticut residents
• Contact NASAA to explore multistate coordination
• Issue investor education guidance about PFOF practices and how Connecticut investors can protect themselves
• Consider rulemaking under state securities law to require enhanced disclosure of PFOF arrangements affecting Connecticut retail investors

Contacting the Connecticut Department of Banking, Securities and Business Investments Division

Connecticut investors and advocates can contact the Connecticut Department of Banking, Securities and Business Investments Division at https://portal.ct.gov/DOB to report concerns and request regulatory action on PFOF practices affecting Connecticut residents.