FINRA fines RBC Capital Markets $1 mln for supervisory failures

Thu Apr 23, 2015 10:35am EDT
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April 23 (Reuters) - The Financial Industry Regulatory Authority (FINRA) said it has ordered RBC Capital Markets to pay a $1 million fine and about $434,000 in compensation to customers for supervisory failures.

The supervisory failures resulted in sales of unsuitable reverse convertibles, the Wall Street watchdog said on Thursday.

Reverse convertibles are interest-bearing notes in which repayment of principal is tied to the performance of an underlying asset, such as a stock or basket of stocks.

RBC did not have supervisory systems to review transactions when reverse convertibles were sold to customers, violating both FINRA's rules and the RBC's own suitability guidelines, FINRA said.

The company failed to detect the sale of 364 reverse convertible transactions in 218 accounts by 99 of its representatives that were unsuitable for customers. The customers incurred losses of about $1.1 million.

RBC made payments to many customers pursuant to the settlement of a class action lawsuit and FINRA ordered restitution to the remainder of affected customers, FINRA said.

In settling this matter, RBC neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

(Reporting By Sudarshan Varadhan; Editing by Sriraj Kalluvila)