The Financial Industry Regulatory Authority (FINRA) has ordered RBC Capital Markets to pay a $1m fine and approximately $434,000 in restitution to customers for supervisory failures resulting in sales of unsuitable reverse convertibles.
FINRA executive vice president and chief of enforcement Brad Bennett said: "Securities firms must ensure that their brokers understand the inherent risks associated with the complex products they are selling, and be able to determine if they are suitable for investors before recommending them to retail customers.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
"When the firm establishes suitability guidelines, it must police the transactions to ensure they appropriately meet their own criteria."
FINRA said RBC failed to have supervisory systems designed to identify transactions for supervisory review when reverse convertibles were sold to customers, in violation of FINRA’s rules as well as the firm’s own suitability guidelines.
The firm has also failed to detect the sale by 99 of its registered representatives of 364 reverse convertible transactions in 218 accounts that were unsuitable for the customers, incurring losses totaling at least $1.1m for them, the regulator added.
In settling this matter, RBC has neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData
