FINRA Fines RBC $1 Million Over Junk Bond Oversight Lapses

Posted on December 22nd, 2021 at 2:50 PM
FINRA Fines RBC $1 Million Over Junk Bond Oversight Lapses

From the Desk of Jim Eccleston at Eccleston Law:

The Financial Industry Regulatory Authority (FINRA) has fined RBC Wealth Management $1 million over its alleged failure to monitor client accounts for overallocation in high-yield or “junk” bonds. 

According to FINRA, RBC failed to implement a system designed to oversee its advisors’ recommendations and sales of high-yield corporate and municipal bonds from July 2013 through June 2016. Due to RBC’s lapses, FINRA alleged that the Minnesota-based firm failed to flag and subsequently review nearly 100 client accounts featuring conservative investment profiles for “potentially unsuitable concentration levels.” It was determined that RBC breached FINRA Rule 2111, which requires firms to have a “reasonable basis” to believe that recommended investments are suitable for a client based on age, financial situation, risk profile and other factors. 

RBC Wealth Management, which employs nearly 2,000 advisors, has updated its company policies to restrict sales of high-yield bonds in conservative client accounts and provide additional guidance to employees pertaining to suitability. FINRA cited RBC’s policies as the main culprit because the firm’s procedures failed to inform advisors about the suitability of the products based on a client’s risk profile. 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, regulatory and disciplinary matters.

 

Tags: eccleston, eccleston law, finra, fines

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