FINRA fines RBC Capital Markets $15,000 for muni violations
3 min read
The Financial Industry Regulatory Authority has fined RBC Capital Markets $15,000 for violating Municipal Securities Rulemaking Board Rules G-15 on confirmation, G-8 on books and records and G-27 on supervision for their role in sending incorrect confirmations on municipal securities transactions.
Municipal securities violations represent only a portion of the transactions FINRA highlighted in its complaint, ultimately charging RBC a total of $375,000 in fines and $393,833.50 in restitution. The complaint encompasses multiple violations that the firm was charged with since 2006. RBC neither admitted or denied FINRA’s findings.
Between 2010 and 2017, the firm sent its institutional customers 3,500 confirmations on municipal securities transactions that said they were executed in an agency capacity when they were really executed in a principal capacity.
“The inaccuracies stemmed from two coding errors in the electronic systems that RBC relied on for sending trade confirmations,” FINRA said. “A third-party vendor that RBC retained utilized a coding hierarchy that caused the incorrect capacity to be reflected on certain trade confirmations. Also, an RBC internal blotter code used for foreign fixed income transactions was misconfigured to mark all transactions processed through the code as agency.”
In 2017 a customer raised concerns about the confirmations and the firm remedied the coding errors, FINRA said.
Additionally, between 2010 and 2019, RBC sent 370,000 trade confirmations for fixed income transactions, which included an unspecified number of muni transactions that inaccurately said they were solicited when they were unsolicited. The error was due to RBC’s coding of its fixed income Trade Order Management System that automatically populated the field, noting the transactions were solicited. The firm remedied the issue in 2019.
Outside munis, RBC also failed to deliver trade confirmations on 267,000 for 720 customers that had requested electronic confirmations in addition to failing to send trade confirmations for millions of dividend reinvestment plan (DRIP) transactions.
“RBC did not provide customers with a detailed written description of the DRIP prior to enrollment containing certain disclosures, as required by the 2006 No-Action letter,” FINRA said. “RBC instead confirmed automatic dividend reinvestments pursuant to a DRIP through monthly account statements rather than trade-by-trade confirmations.”
The firm also violated Regulation T, which governs cash accounts and the amount of credit brokers can extend to investors.
“Certain RBC customers with cash accounts and certain customers of introducing brokers with cash accounts for which RBC was the clearing broker sold securities without previously paying for them in full,” FINRA said.
The firm supervisory systems failed to catch all of this, FINRA investigators found.
“The firm’s written supervisory procedures failed to describe how supervisors should conduct periodic monitoring to confirm that internal firm systems and third-party vendor systems were working as intended to send customers trade confirmations when required and with accurate information,” FINRA said.
All in, the firm violated Exchange Act Rule 10b-10, FINRA Rules 2232, 4511 and 2010, in addition to MSRB Rules G-15, G-8 and G-27.
“RBC Wealth Management takes regulatory matters very seriously, and we fully cooperated with FINRA to reach a resolution in this matter. We have paid restitution to the impacted customers and have taken the necessary remedial supervisory action,” a spokesperson for RBC said.
