RBC Capital And Two Senior Execs Charged With Muni Violations

RBC Capital And Two Senior Execs Charged With Muni Violations

Violation of instructions of issuers, as well as their own internal policies regarding the allocation of municipal bonds, has invited sanctions from The Securities Exchange Commission (SEC) for RBC Capital Markets as well as their former Head of Municipal Sales and Head of the Municipal Syndicate Desk, as per a press release dated 17th September issued by the SEC.

These transactions took place over a 4-year period during which RBC appears to have routinely allocated bonds identified either for institutional or retail customers, to parties known as ‘flippers’ in the industry. These ‘flippers’ are known to make a margin while selling these bonds to other broker-dealers.

Some of these bonds found a way back to RBC when they placed orders with these ‘flippers’ who had been improperly sold the same bonds in the first instance. This allowed RBC to overcome the lower priority in allocation they would have encountered had these orders been placed directly with the underwriters.

RBC Capital And Two Senior Execs Charged With Muni Violations

RBC’s Position

Charges that RBC has been found guilty of are:

  • Order disclosure, fair dealing, and supervisory provisions of Municipal Securities Rulemaking Board (MSRB) Rules and the related Exchange Act provision being violated
  • Broker registration provisions of the Exchange Act being violated by the flippers
  • Registered representatives not reasonably supervised, within the meaning of the Exchange Act

It appears that RBC has consented to the public administrative cease-and-desist order that lists the violations and agreed to a censure.

Charges of municipal bond offering “flipping” and alleged retail order period abuses in August 2018, December 2018, September 2019, April 2020, July 2020, September 2020, July 2021, and August 2021, had also been filed by the SEC.

The RBC Lawsuit Settlement

The SEC’s press release announced the payment of over $800K by RBC to settle the charges related to its municipal bonds practice

The amount is constituted of as follows:

  • $150,000 as penalty
  • $552,440 as disgorgement
  • $160,886 as prejudgment interest

While passing the order, the SEC also noted that RBC should have known where ‘flippers’ stand regarding allocation of municipal bonds and should never have been beneficiaries in primary allotments of the same.

RBC Investor Protection

Investors worried about their investments with RBC Capital Markets can approach securities attorneys at Haselkorn & Thibaut, which is a national investment fraud law firm, that has offices in New York, Florida, Texas, Arizona, and North Carolina. Investors across the country are represented by Haselkorn & Thibaut in their claims against broker-dealers.

For a free consultation, you can reach Haselkorn & Thibaut at 1-800-856-3352. For more information, you can also visit them at www.InvestmentFraudLawyers.com.

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