This thread is for shaming stock brokerages that refuse to let you buy or sell stocks because “they know better than you”. Nearly all retail brokers these days are “self directed” brokers, where they don’t tell you what to buy - that’s up to you, and they just handle placing your order for a fee. This is in contrast to a “full service” broker where you have a personal broker who calls you up with specific trade / investment ideas, understands your personal situation, and may manage and trade your portfolio for you (for much higher fees). In the self directed case, you’re responsible for your investment because it’s your idea to buy whatever stock it is.
What I really dislike is the growing trend of these self directed brokers deciding they want to protect you from making money by enacting policies that forbid everyone buying many stocks/ETFs because some people might lose money. News flash - you can’t stop bad investors from gambling and often losing money, but at least stop harming the rest of us.
Here are some examples:
- Fidelity is a well known and probably one of the first brokers to start the Nanny Broker trend. They block several types of preferred stocks, certain OTC stocks, most volatility products, certain ETNs for no clear reason (like AMJ, the one tracking MLPs), many leveraged ETFs/ETNs (Reml, MORL, CEFL, …), etc. there is a longer list of annoyances that aren’t quite bans, like how you have to phone in every order to buy a muni fund or CEF in your IRA and various other products they find more confusing than most people actually buying them. In these latter cases, maybe you can convince them to place the trade, or not, or maybe you convince them, the stock goes up, and they call you a few days later and bust your profitable trade since they “shouldn’t” have let you buy it after all (actual case!!).
- Robinhood recently said they’re making up a new policy to ban purchase of penny stocks with low prices (under $0.10), specifically targeting HMNY, the parent of MoviePass, which is about 5c currently.
- Merrill Edge is planning on forbidding purchases of low priced or small cap stocks in the very near future. More than one customer told me they had been called and that starting next month, no merrill client will be allowed to buy any security trading below $5/share or 300 million in market capitalization. Final policy still TBD.
- Interactive brokers won’t let you trade certain two types of OTC stocks, those listed with a warning on OTCMarkets.com (“caveat emptor”) or those trading on the gray sheets. They also have lots more restrictions on small cap stocks with prices under $5 or market values under $300M, but most of those are not too bad for the typical retail trader (transfers are hard or not allowed, certain more institutional style account setups can’t buy these small caps).
- Vanguard won’t allow buying stocks under $0.01. They also make you call in if you want to buy an OTC stock and get approval of the risks, and this doesn’t last forever but does last a while. This isn’t too bad as these restrictions go.
Please post any similar brokerage annoyances you encounter, and I’ll keep OP or the wiki updated.
For reference, $300M is not that small a company. The Russell 2000, the biggest small cap index, typically lets in stocks of about half that size or bigger ($150M+), so these brokers are happy to let you buy a bunch of small cap stocks in your ETF, but not directly by yourself. Consistency isn’t their strong point.
For those of you looking for good discount brokers, here are my suggestions to avoid these headaches:
- TD Ameritrade
moving brokers isn’t easy or painless, so picking a good one from the start is definitely worthwhile given many are otherwise similar with prices, features, etc. if you’re stuck at a Nanny Broker currently and want to move to a better one, you can often get a transfer bonus to soften the blow of the hassle.