RBC Capital Markets, LLC has agreed to pay a $75,000 fine as part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From January 2016 until at least December 2023, RBC’s system that provided customers with rollback benefit rights on eligible transactions was not reasonably designed in several respects. The firm’s oversight of discounts available through rollback rights was based on an automated alert set up to detect transactions in which a client liquidates a position in a fund family and then buys back into the same family at a later date.
At least until December 2021, the alert parameters were set so that the alert was triggered only when the transaction principal was over $1,000. The parameters were also set so that the notification was only triggered when the rollback window was for 100 days or less. Therefore, the alert was not designed and does not capture all transactions that qualify for rollback privileges.
For example, about 80% of trades missing the right to reinstate benefit between January 2016 and December 2021 were trades where the alert was not triggered because the trade involved less than $1,000 in principal or involved a right to reinstatement window of more than 100 days . The company also, at times, failed to reasonably review the notices they did trigger to ensure that eligible customers were credited with reinstatement benefits.
As a result of its oversight deficiencies, RBC failed to provide more than 1,450 accounts with rights to restore the benefits they were entitled to, and customers paid $264,939.44 in additional fees and sales commissions.
Therefore, RBC violated FINRA Rules 3110 and 2010.
The defendant also consents to a reprimand and a $75,000 fine.