The Nanny Broker thread

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 (“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
  • Schwab

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.


This is an automatically-generated Wiki post for this new topic. Any member can edit this post and use it as a summary of the topic’s highlights.

Fido lifted the volatility ban fairly quickly… a week or two, maybe?

Your points bring up a good reminder to have a multiplicity of FIs for some of our regular transactions and shenanigans. Different FIs provide different services – sometimes very important.

IB allowed me to trade volatility products right after the February crash. Fido, not for a while.

Diverging from brokers to banks, PenFed provides easy quick ACH, but limited amounts per day. I find their wire service to be better than others, especially when I make a lot of moves (consolidating monies from various areas into one account and then wiring). Others will put a hold on the transfers. PF allows the wire with a quick phone call verification that it’s really me.

Ally and Alliant allow much higher ACH limits. Alliant allows for decreased hold amounts on deposits over time – initially, some of the deposit is held, some released immediately. As more deposits are made, they increase the amount released immediately. Nice, over time.

Having CC providers that allow $0 fee BTs is great to couple with 0% APR CCs when you want to consolidate or work with an FI that won’t allow checking account transfer for the BT money.

Fidelity also makes you call in to trade more than 10k shares at a time. It’s not about the amount of the trade, just the number of shares, which is bizarre to me.

Fidelity also quizzes you when you apply to trade options. “If you want to go long on a stock, what type of option would you buy?”

Thanks for the update. SXVY and TVIX and such are all tradable there now? I don’t have an account to check.

A number of brokers either banned trading or seriously raised margin requirements in the wake of the Feb volatility crash that blew up one and nearly blew up several other inverse VIX products. Luckily this didn’t happen until after the first 1-2 days, when there were still good trading opportunities.

The 10k share thing is annoying but at least somewhat understandable. Trades of 10k or more can count as block trades, even if the stock is low priced, and block trade orders can be handled differently for sometimes better execution.

You can just place a trade for 9900 shares and avoid the hassle and phone call.

For options, brokers are supposed to make sure you know enough about them to have your trading losses be your problem and not your broker’s from a compliance perspective. Sometimes when applying for options trading permissions, you might have to answer a few basic questions like that.


Yes, I can trade the symbols you list plus ZIV, XIVH (may it rest in peace. It was the BEST!), VMIN, VMAX… It was only a week or two ban.

I get significantly better execution elsewhere, so I don’t do much with Fido on these products.

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Not sure if this fits or not… (and these are as far as I know – maybe someone has a workaround for them!)

  • Fido won’t allow cash secured naked puts in an IRA but will allow purchase of SVXY, UVXY, etc which issue a K1

  • IB will allow cash secured naked puts in an IRA but will not allow purchase of SVXY, UVXY, etc citing “Special MLP not permitted for retirement accounts”

  • E*Trade allows both


Merrill Edge looking less good.

we’ll be placing restrictions on low priced securities beginning September 30, 2018. As a reminder, low-priced securities are generally defined as securities that trade over-the-counter at or below $5-per-share and/or are less than or equal to $300 million in market capitalization. In addition, they are generally quoted in over-the-counter markets and may also trade on securities exchanges, including foreign securities exchanges.

What’s changing on September 30? We’ll be applying a thorough regulatory review of sales and outgoing transfers of certain low-priced securities, which will result in trades or transfers being delayed or blocked.
If we restrict the sale of securities you currently hold, you’ll have the ability to keep your current positions in your account or transfer the positions to another broker dealer or transfer agent.

Don’t worry, they’ll let still let you buy junk stocks after they run way up and are over $5 / $300M. TLRY, I’m looking at you.

I’d stay away from MLPs in an IRA.

Vanguard will block purchase of any leveraged mutual funds/ETF/ETNs later this month. Existing positions can be held.

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Hearing Fidelity blocks various types of apparently risk bonds, ie all Puerto Rico, and the like, among others. Probably not a great place for bond investors, and they’re bad on some types of preferred stocks as well (can’t trade online, but can call in orders if you care enough). Also heard some bad things about their FX conversion costs on foreign dividends.

For Merrill, it seems they recently imposed a 100 max contract limit across all uncovered options, regardless of exposure or number of stocks or whatever. You supposedly can get this increased with some higher level review process, but it’s not fast.

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Is there something inherently different about brokerages? Are they liable for losses if you do something that wasn’t a good move?

My bank doesn’t call me when I withdraw money at a Vegas atm telling me I can’t withdraw because I shouldn’t be gambling. My credit card company doesn’t stop me from buying things they think I can’t afford. Why do brokerages do this?

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I didn’t know this was a thing, since most of my trading experience is with Schwab. I agree that you can’t stop bad investors and that these policies are ridiculous.

Remember, we are not the typical customer. I wouldn’t mind if a brokerage wanted to put gates in place to warn people before they do stupid things to themselves. It shouldn’t take more than a simple phone call to remove it permanently.

I’m totally okay with Robinhood’s policy, though, since they target newbies.

But they do - your bank has an ATM withdrawal limit (most likely both per transaction and per day) you need to request special approval to exceed, and has restrictions that only allow you to withdraw cash you actually have in your account. Your credit card company only gave you a certain credit limit they’ll allow you to spend without first paying down the balance, and also offers numerous purchase protections after-the-fact.


Sure, but banks themselves are liable for fraudulent ATM withdrawals, so it makes sense they would set a limit. And your bank account isn’t a line of credit (generally), so it also makes sense that they would only allow you to withdraw what is in your account.

And similarly with a credit card, they’ve decided the extent that they are willing to accept losses if I fail to pay. Their decline of transactions is for the benefit of themselves, not the customer, which is the crux of my question - are these brokerages doing these things to protect their customers, or doing these things to protect themselves?

Both. An ATM withdrawal is it’s own transaction; what you do with the cash afterwards isnt the bank’s concern, their responsibility is getting your cash into your hands. A credit card offers chargebacks, to help ensure you do in fact get what you were buying. A brokerage is providing you direct access to the investments; they arent giving you your cash to do what you want in a subsequent transaction, and they cant offer the same back-end protections as credit cards to ensure you are getting what you think you are buying.

So brokerages are protecting the customer who is attempting something outside multiple deviations of typical customer risk levels, and protecting themselves from claims that they breached their fiduciary responsibility by allowing a customer to do something outside the relm of typical customer risk levels. For some things, they’ll allow on a case-by-case basis with a higher level approval. For others, it’s probably simply not worth setting up special authorizations for the handful of customers who would even request to be approved.


But they don’t have a duty to customers at all regarding unsolicited trades, certainly not a fiduciary duty. That’s what makes the whole thing so frustrating. Of course they can get sued by bad or unlucky investors, but those cases go to FINRA arbitration and lose, pretty much, unless there was a broker advisor involved and made unsuitable investments (what sort of investors is it for whom a money losing investment is, after the fact, suitable?).

I guess they just don’t want to deal with those nuisance suits, which cost them lawyer time if not settlement.


Ding! Ding! Ding!

Could still be fraudulent trades, someone gets logon credentials and makes trades pumping penny stocks, turns around dumping stocks from their legitimate account making a profit. Customer calls the bank says account was compromised, they’ll “reverse” the trades but end up eating the difference between buying and selling price.

Also, they want you to trade often and preferably have large balances because that’s how they are marking some of their money. Customers losing it all on penny stocks Vegas style doesn’t bring them money in the long run.