Category Archives: Reverse Convertibles

RBC Capital Markets Fined $1 Million Over Sale of Reverse Convertible Investments

April 23, 2015

RBC Capital Markets ,  entered into a Letter of Acceptance, Waiver and Consent  (AWC) with the Financial Industry Regulatory Authority (FINRA) to resolve allegations that  from 2008 through 2012 the firm failed to have in place a supervisory system reasonably designed to ensure compliance with applicable securities laws and internal guidelines concerning the suitability of reverse convertibles.

Reverse Convertibles typically consist of interest-bearing notes in which repayment of principal is tied to the performance of an unrelated asset, such as a basket of stocks. According to FINRA, RBC handled over 100,000 reverse convertible transactions in 5,000 accounts, but failed to ensure that the recommendations were suitable based upon customers’ investing goals, income, net worth and experience.

RBC  was assessed a fine of $1,000,000 and the payment of $434,000 in restitution to customers suffering losses on the investments.

FINRA Case # 2010022918701

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