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Texas Regulatory Action

Texas State Securities Board: What Texas Financial Regulators Should Do About Citadel

The Texas State Securities Board has jurisdiction to investigate Citadel Securities' payment for order flow practices affecting an estimated 5.5 million Texas retail investors — the third-largest state retail investor population. Here is what state regulators should do — and why.

The Texas State Securities Board's Authority

Texas Attorney General Ken Paxton and the Texas State Securities Board have powerful enforcement tools under the Texas Securities Act (Tex. Rev. Civ. Stat. Art. 581) and the Texas Deceptive Trade Practices Act to investigate PFOF. The Texas SSB's history of aggressive enforcement makes it well-positioned to lead a multistate action.

The Harm Requiring Regulatory Response

Texas retail investors are the third most affected population in the nation. From Houston energy workers to Dallas tech professionals to Austin entrepreneurs, millions of Texas retail investors' orders are routed to Citadel Securities through PFOF arrangements. The Texas State Securities Board, one of the nation's most aggressive regulators historically, has taken no action on PFOF.

What State Regulators Should Do

The Texas State Securities Board, in coordination with the Texas Attorney General's office, should:

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

Contacting the Texas State Securities Board

Texas investors and advocates can contact the Texas State Securities Board at https://www.ssb.texas.gov to report concerns and request regulatory action on PFOF practices affecting Texas residents.

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