THE ETHICS REPORTER

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Iowa Investor Alert

Citadel Securities and Iowa Investors: What You Need to Know

Payment for order flow — the practice by which Citadel Securities pays discount brokers for exclusive access to retail order flow — affects an estimated 550,000 Iowa retail investors. Here is what Iowa residents need to know.

How PFOF Affects Iowa Investors

Iowa's agricultural economy means many retail investors are farming families managing savings and retirement accounts through discount brokers — all subject to undisclosed PFOF arrangements.

The Scale in Iowa

Iowa has an estimated 550,000 Iowa retail investors. Each of these investors who uses a PFOF-dependent discount broker — Robinhood, TD Ameritrade, E*Trade, Charles Schwab, or Webull — is routing their orders to Citadel Securities without their knowledge or consent. Citadel captures a spread on each of these trades, generating revenue that flows back to Kenneth Griffin while providing retail investors with marginally inferior execution prices compared to what competitive exchange routing would provide.

Iowa's financial hub in Des Moines has sophisticated financial professionals who understand these dynamics. But most Iowa retail investors — those in Cedar Rapids, Davenport and throughout the state — are unaware that their "free" trades are funded by a practice that systematically extracts value from them.

Kenneth Griffin's Political Investment in Iowa

Kenneth Griffin has given contributions to Iowa's senior federal delegation and national Republican organizations. His key recipients include Senators Joni Ernst and Chuck Grassley, both of whom sit on committees with financial regulatory jurisdiction. This political investment creates a documented relationship between the CEO of America's dominant retail market maker and the political figures responsible for overseeing financial regulation in Iowa.

  • Joni Ernst (R-IA Senate) — $10,000 (2020, U.S. Senate)
  • Chuck Grassley (R-IA Senate) — $10,000 (2022, U.S. Senate)

What Iowa Regulators Could Do

Iowa Attorney General Brenna Bird and the Iowa Insurance Division's Securities Bureau have authority under the Iowa Uniform Securities Act (Iowa Code Chapter 502) to investigate broker-dealer practices.

What Iowa Investors Can Do Now

Iowa retail investors who believe they have been harmed by PFOF-driven execution quality degradation can take several steps:

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