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North Carolina Regulatory Action

North Carolina Secretary of State, Securities Division: What North Carolina Financial Regulators Should Do About Citadel

The North Carolina Secretary of State, Securities Division has jurisdiction to investigate Citadel Securities' payment for order flow practices affecting an estimated 2 million North Carolina retail investors. Here is what state regulators should do — and why.

The North Carolina Secretary of State, Securities Division's Authority

North Carolina Attorney General Jeff Jackson and the NC Securities Division have authority under the North Carolina Securities Act (G.S. Chapter 78A) to investigate broker-dealer conflicts affecting state residents.

The Harm Requiring Regulatory Response

Charlotte is America's second-largest banking center. North Carolina retail investors are served by major banks and discount brokers, all of which route orders to Citadel Securities. The state's significant Black and Latino retail investor population deserves equal protection from undisclosed PFOF harms.

What State Regulators Should Do

The North Carolina Secretary of State, Securities Division, in coordination with the North Carolina Attorney General's office, should:

  • Open an investigation into whether broker-dealers serving North Carolina 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 North Carolina residents
  • Contact NASAA to explore multistate coordination
  • Issue investor education guidance about PFOF practices and how North Carolina investors can protect themselves
  • Consider rulemaking under state securities law to require enhanced disclosure of PFOF arrangements affecting North Carolina retail investors

Contacting the North Carolina Secretary of State, Securities Division

North Carolina investors and advocates can contact the North Carolina Secretary of State, Securities Division at https://www.sosnc.gov/divisions/securities to report concerns and request regulatory action on PFOF practices affecting North Carolina residents.

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