RBC Ordered by FINRA to Pay More than $1.4M in Fines and Restitution for Unsuitable Sales of Reverse Convertibles
FINRA found that RBC failed to have supervisory systems practically 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. RBC established suitability guidelines for the sale of reverse convertibles setting specific criteria for customer investment objectives, annual income, net worth, liquid net worth and investment experience. Consequently, the firm unsuccessfully detected the sale by 99 of its registered representatives of 364 reverse convertible transactions in 218 accounts that were unsuitable for those customers. The customers sustained losses totaling at least $1.1 million. RBC made payments to several customers pursuant to the settlement of a class action lawsuit; FINRA ordered compensation to the remainder of affected customers. Resulting in FINRA ordering RBC Capital Markets to pay a $1 million fine and approximately $434,000 in restitution to customers for supervisory failures resulting in sales of unsuitable reverse convertibles.