September 17, 2021
RBC Capital Markets has agreed to pay more than $ 863,000 to resolve charges of circumvention of proceedings to give institutional and retail investors priority allocations in certain municipal bond offerings over a four-year period, announced Friday the Securities and Exchange Commission.
From January 2014 to December 2017, RBC improperly allocated bonds to “pinball machines”, unregistered traders who then resold the bonds to other brokers for a profit. In three instances, RBC also violated the issuer’s instructions to prioritize retail investors and instead sold them first to pinball machines, the SEC said. RBC used its relationship with the rollover companies to improperly obtain bonds for its own inventory in cases where it was not the underwriter, according to the order.
“RBC did not always follow the standard methodology when it did not have priority instructions from issuers, and in 41 cases where orders exceeded available obligations, it did not prioritize client orders. institutional and / or brokers before flipper orders, âthe SEC said in the order.
The SEC accused RBC of violating the order disclosure, fair dealing and oversight provisions of the City Council’s Securities Regulatory Board rules and related provision of the Exchange Act. The settlement includes censorship, a fine of $ 150,000, restitution of $ 552,440, plus pre-judgment interest of $ 160,886.
An RBC spokesperson declined to comment. The company settled the charges without admitting or denying the findings, the SEC said. The agency separately sued the so-called turnaround companies, RMR Asset Management and Core Performance Management, in 2018.
The SEC has pursued related violations more than half a dozen times since 2018, one of the largest resulting in a $ 10 million fine against UBS Financial Services in July 2020.
In her case against RBC, she also brought charges against Kenneth G. Friedrich, the former head of municipal sales, commerce and syndication at RBC, and Jaime L. Durando, the bureau chief of the RBC municipal union. , who agreed to pay fines of $ 30,000 and $ 25,000. , according to the press release and SEC orders. In addition, Friedrich agreed to a six-month limitation on supervisory activities and a six-month ban on trading in new issues of traded municipal securities, the SEC said.
The SEC found that Friedrich and Durando allowed “the improper allocation and sale of new issue bonds to pinball machines,” and Friedrich also allowed “the improper purchase of new issue bonds for RBC’s own inventory via pinball machines, âshe said in a press release.
The two agreed to cease and desist orders, without admitting or denying the findings, the SEC said.
Friedrich did not respond to a request for comment left on social media, and Durando did not respond to a similar request, left to the spokesperson.
“We will continue to prosecute those who undermine the priority rules and prevent legitimate retail or institutional clients from gaining access to newly issued municipal bonds,” said LeeAnn G. Gaunt, head of the Division of Enforcement’s Public Finance Abuse Unit, in a press release. .