SEC Charges Rbc Capital Markets LLC for Disclosure Failures Related to Retirement and Charitable Customers
April 24, 2020
File No. 3-19769
April 24, 2020 - The Securities and Exchange Commission today announced that RBC Capital Markets LLC, a registered broker-dealer and investment adviser located in New York City, agreed to settle charges that it failed to disclose potential conflicts of interest to certain retail retirement account and charitable organization brokerage customers.
According to the SEC's order, from at least July 2012 through August 2017, RBC recommended and sold these customers more expensive mutual fund share classes when less expensive share classes in the same funds were available. The order finds that RBC made these recommendations without disclosing that it would receive greater compensation from the customers' purchases of the more expensive share classes. The order further finds that RBC did not disclose that the more expensive share classes would negatively impact the overall return on the investments due to the different fee structures for the different mutual fund share classes. As a result of RBC's failures, approximately 4,571 customer accounts paid a total of $2,607,676 in sales charges, ongoing fees, and other expenses.
The SEC's order finds that RBC violated the antifraud provisions of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933. Without admitting or denying the SEC's findings, RBC consented to cease-and-desist from future violations of these provisions, to be censured, and to pay disgorgement of $2,607,676 with prejudgment interest of $631,331 and a civil penalty of $650,000.
The SEC's investigation was conducted by Luke Fitzgerald and John Farinacci of the Enforcement Division's Asset Management Unit, and supervised by Assistant Director Corey Schuster. The Office of Compliance Inspections and Examinations' Risk Analysis Examination Team provided data analytics support.