Close Close

Industry Spotlight > Broker Dealers

Galvin Says Royal Alliance Failed to Supervise Agent

Your article was successfully shared with the contacts you provided.

Massachusetts Securities Regulator William Galvin charged Royal Alliance Associates on Tuesday with failing to supervise an unsuitable investment made by one of the firm’s agents, which cost two investors nearly $60,000.

The agent, Stephen F. Davis of Barrington, Rhode Island, has also been charged with breaching his fiduciary duty to his clients, Galvin’s office states.

According to the administrative complaint filed by the Massachusetts Securities Division, Davis took over the Royal Alliance account of two investors after their investment advisor retired, knowing “that the investors were inexperienced and would rely heavily upon his advice.”

(Related:  FINRA Releases 2019 Exam Priorities)

In 2015, Davis advised the couple to exchange an annuity product three years before its expiration for another product with a much lower interest rate.

“Many investors rely on their agent’s assistance in making investments that will best benefit them,” Galvin said. “Agents and firms have a duty to act in the best interest of their clients.”

Davis failed to file the correct paperwork for the exchange in a timely manner, which “led to the couple being charged more than $15,000 in penalties;” Davis, however, received more than $17,000 in commissions for the sale.

“The early exchange of the investment to an annuity with a much lower rate resulted in a further cost to the couple of more than $43,000 in lost interest,” according to the complaint.

Royal Alliance Associates is alleged to have continued in its failure to supervise after denying responsibility for Davis’ actions when the couple complained, the complaint states.

The complaint further states that Royal Alliance did not enforce its own internal policies and procedures, which require an agent to demonstrate an economic justification for recommending that a client switch from one product to another.

Royal Alliance also “opted not to file the required disclosure forms regarding the complaint against Davis,” according to the complaint.

Galvin’s office is seeking an administrative fine and an order requiring the respondents to disgorge profits relating to the alleged wrongdoing and make restitution to compensate the investors. Sanctions and censure are also being sought.

— Related on ThinkAdvisor: