What is a Mandatory Reorganization Fee at Etrade, Charles Schwab, Fidleity and TD Ameritrade 2022


What is and how much do brokerage firms charge in voluntary and mandatory reorganization fee: TD Ameritrade, Fidelity, Charles Schwab, Etrade, Firstrade, Webull, and Stash Invest.



What is a Reorganization Fee at a Brokerage Firm?


Seems like fees are everywhere, doesn’t it? You pay a brokerage fee, also called a broker fee, when you make purchases and trade stocks or options. You also pay fees to maintain your account or pay for data. You’ll pay a fee if your brokerage includes subscriptions for research or investing help on trading platforms. You may even pay fees if you don’t use your account much (these are called inactivity fees).

Many industries charge brokerage fees — including the insurance and real estate industries.


Types of Fees


Some of the most common broker fees include:

  • Trade commission
  • Expense ratio
  • Management or maintenance fee
  • Sales load
  • 401(k) fees
  • Account transfer fees
  • Wire transfer fees
  • Checking account service fees
  • Paper statement fees
  • Account closing fees

...and reorganization fees.


What is a Reorganization Fee?


You may see two different types of organization fees: mandatory reorganization fees and voluntary reorganization fees.

- Your broker charges a mandatory reorganization fee when there is a reverse stock split or a mandatory cash merger. The fee is also charged on some share exchanges where stockholders have no choice in the reorganization as it is mandated by the issuer for all outstanding shares. Mandatory corporate actions such as stock splits, dividends, mergers, acquisitions, rights issues and spin-offs get processed.

- On the other hand, you get charged a voluntary reorganization fee when corporate actions, such as voluntary tender offers, occur.

Fees often differ for voluntary and involuntary reorganizations and may also depend on your client status with the broker — some don't charge their "premier" customers.


Who Must Pay a Reorganization Fee?


You’ll need to pay a reorganization fee if your broker will need to re-register the stock and facilitate reorganization in your account. If you know the company is going to do a split, you may need to pay a reorganization fee.

Note: You may not know about an upcoming reverse split date and the fees, so do your research, pay attention to company news and key in on whether a reverse split is coming down the pike.


How Much are Reorganization Fees?


Reorganization fees vary per broker. A few examples of reorganization fees through various popular online brokers include:

Charles Schwab:
$39 voluntary security reorganization
$39 post-effective security reorganization

TD Ameritrade:
$38 for mandatory reorganization fee
$38 for voluntary tender offer

E*Trade:
$38 for mandatory reorganization fee
$38 for voluntary tender offer
$50 for actions reflected on physical certificates

Fidelity:
$0 reorganization fee

Vanguard:
$0 reorganization fee

Webull:
$0 reorganization fee


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Which Brokers Charge Reorganization Fees?


Almost all brokers charge fees — but not every broker charges reorganization fees. For example, TD Ameritrade is always commission-free. TD Ameritrade doesn't charge you fees to open your account, to maintain your account or to transfer funds to your account.

Your best bet is to comb through each broker you’re interested in to determine whether a specific broker charges reorganization fees. Do your due diligence if you’re considering investing with a broker we haven’t listed here. It’s possible to find a broker that doesn’t charge reorganization fees. Your best bet is to shop around.


How Do You Pay Reorganization Fees?


Your broker will automatically deduct your reorganization fee from your account. Reach out to your broker to understand the details — including when the reorganization fee is deducted after a specific event.


Evaluate and Shop Around to Avoid Reorganization Fees


If a broker has reorganization fees, is that a good enough reason to switch to a different broker?

No, not necessarily. It’s really important to evaluate everything a particular broker offers and compare it to others. For example, if you want a specific socially responsible investing option (like halal investing or another very specific investment type) the reorganization fee shouldn’t be a barrier.

Do your due diligence but don’t let it hold you back, either!


About the Author
Chad Morris is a financial writer with more than 20 years experience as both an English teacher and an avid trader. When he isn’t writing expert content for Brokerage-Review.com, Chad can usually be found managing his portfolio or building a new home computer.