FINRA Fines RBC Capital Markets $360k for Supervisory Failure

The Financial Industry Regulatory Authority (FINRA) has hit RBC Capital Markets, a Toronto-headquartered global investment bank, with a censure order and monetary fine of $360,000 for the failure of its supervisory system between June 2018 and February 2020.

The bank, whose principal place of business is in New York, the United States, provides securities transaction and clearance services to its customers and those of its introducing brokers.

FINRA, a membership-based self-regulatory body, said the penalty is for the company’s failure to “timely or reasonably monitor thousands of employee outside brokerage account statements for compliance with the firm’s trading restrictions" within the period.

The restrictions relate to RBC Capital Markets’ policies on pre-clearance and holding periods, among others.

The private American regulator said the financial services provider contravened FINRA Rules 3110 and 2010 which demand the supervision of associated persons working for its members’ firms and the maintenance of high standards in its dealings.

Earlier in June, FINRA slammed a censure order and a monetary penalty of $90,000 on RBC Capital Markets following Cboe Exchange's allegation of anticipatory hedging allegations against the company.

More Details on the New Fine

According to FINRA, RBC Capital Markets between June 2018 and February 2020 failed to put in place a reasonably designed supervisory system, including written supervisory procedures, to timely review paper statements from employees' outside accounts.

“For example, the firm had no prescribed timeframe to track, reconcile, and review statements. As a result, and due to the manual nature of the paper statement review process, personnel turnover, and outdated technology systems, as of February 2020, the firm had a backlog of approximately 8,950 unreviewed account statements, with some dating as far back as June 2018,” FINRA explained.

The review of the backlog was not completed until February 2021, FINRA said.

Moreover, the financial watchdog disclosed that RBC Capital Markets manually tracked the receipt of paper statements, had no system in place to notify the firm or employees that statements were missing and had no procedure for following up on missing statements.

“As a result, in some instances, the firm did not receive paper statements for review. For example, after the firm identified the backlog of unreviewed statements described above, it discovered that approximately 2,600 additional statements had not been mailed to the firm,” the markets supervisor said.

FINRA and Dealerweb

Meanwhile, FINRA recently slapped a $100,000 fine on Dealerweb Inc., an operator of an electronic interdealer platform for mortgage-backed securities.

Dealerweb inaccurately reported approximately 180,000 transactions in TRACE-eligible securities to the FINRA Trade Reporting and Compliance Engine (TRACE) between July 2016 and December 2020, the regulator said.