RBC resolves U.S. SEC charges over bond abuses, is fined

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  • Royal Bank of Canada
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  • RBC Capital Markets, LLC
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  • UBS Group AG
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  • U.S. Stock Transfer Corp.
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  • UBS AG
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Sept 17 (Reuters) – A Royal Bank of Canada (RY.TO) unit was censured and pays greater than $863,000 to resolve U.S. regulatory charges it broke guidelines meant to offer retail and institutional traders precedence in shopping for new municipal bonds.

In a civil settlement introduced on Friday, the U.S. Securities and Exchange Commission stated RBC Capital Markets LLC improperly allotted bonds to traders referred to as “flippers” who rapidly resold their bonds to different broker-dealers at a revenue.

Municipal bonds are sometimes issued by states, cities and faculty districts to fund operations and tasks, and include tax benefits over company and U.S. authorities bonds.

The SEC stated RBC knew or ought to have recognized that giving precedence to flippers violated its guidelines on bond choices it underwrote.

It stated RBC additionally improperly purchased new bonds it had not underwritten from flippers, somewhat than wait in line to purchase these bonds from the underwriters.

The alleged violations occurred from 2014 to 2017.

RBC’s payout features a $150,000 civil effective, plus disgorgement and curiosity.

Two RBC officers, head of municipal syndication Jaime Durando and former head of municipal gross sales Kenneth Friedrich, had been additionally censured by the SEC and fined a mixed $55,000. Friedrich left the financial institution in 2016.

None of the defendants admitted or denied wrongdoing. RBC closed the flippers’ accounts and improved surveillance to assist avert a recurrence.

RBC declined to remark. Lawyers for the opposite defendants didn’t instantly reply to requests for remark.

The SEC has reached a number of settlements over flipping abuses in municipal bonds, together with a $10 million accord with Switzerland’s UBS AG (UBSG.S) in July 2020.

Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Dan Grebler

A Royal Bank of Canada (RBC) logo is seen on Bay Street in the heart of the financial district in Toronto, January 22, 2015. REUTERS/Mark Blinch/File Photo

Headquarters of the U.S. Securities and Exchange Commission (SEC) in Washington, D.C., U.S. REUTERS/Andrew Kelly

A Royal Bank of Canada (RBC) logo is seen on Bay Street in the heart of the financial district in Toronto, January 22, 2015. REUTERS/Mark Blinch/File Photo