Key Insights
- RBC Capital Markets agrees to pay a $75,000 fine to FINRA for inadequacies in its rights of reinstatement system from January 2016 to December 2023.
- The firm’s flawed alert system failed to capture transactions under $1,000 and reinstatement windows over 100 days, affecting about 80% of eligible trades.
- Over 1,450 customer accounts were denied rightful benefits, resulting in $264,939.44 in excess charges and fees, violating FINRA Rules 3110 and 2010.
NEW YORK (MarketsXplora) – RBC Capital Markets, LLC has agreed to pay a $75,000 fine to settle charges brought by the Financial Industry Regulatory Authority (FINRA) over deficiencies in its rights of reinstatement system, FINRA announced on Friday.
The settlement addresses issues spanning from January 2016 to December 2023, during which RBC’s system for providing customers with rights of reinstatement benefits on eligible transactions was found to be inadequately designed.
FINRA’s investigation revealed that RBC’s oversight relied on an automated alert system with limitations that failed to capture all eligible transactions. The alert was set to trigger only for transactions exceeding $1,000 in principal and for reinstatement windows of 100 days or less.
These parameters resulted in approximately 80% of trades missing reinstatement benefits between January 2016 and December 2021, either due to transactions below $1,000 or involving reinstatement windows longer than 100 days.
Furthermore, the regulator found that RBC occasionally failed to adequately review alerts that did trigger, compounding the issue.
As a consequence of these supervisory deficiencies, over 1,450 customer accounts were denied rights of reinstatement benefits to which they were entitled. This resulted in excess sales charges and fees totaling $264,939.44.
FINRA determined that RBC’s actions violated FINRA Rules 3110 and 2010, which pertain to supervision and standards of commercial honor and principles of trade, respectively.
In addition to the monetary fine, RBC has consented to a censure as part of the settlement agreement.
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