RBC Capital Markets agreed to pay $3.9 million to settle charges by the Securities and Exchange Commission that it failed to disclose potential conflicts of interest when it recommended and sold certain mutual fund share classes to some retail retirement account and charitable organization brokerage customers.
The firm “fully cooperated” with the SEC’s review of its mutual fund sales, part of a multi-firm review of those products, RBC’s broker-dealer and RIA division, RBC Wealth Management, said in a statement Monday.
“RBC Wealth Management is committed to ensuring the firm and all of its advisors operate in accordance with the regulations governing our industry,” the firm said, adding: “In the rare case that an issue arises, we work quickly to address it, compensate clients and put into place processes to prevent it from happening in the future. In response to this particular issue, we converted affected accounts, as needed, to the correct mutual fund share class. We have also reviewed and updated all procedures and policies related to mutual fund share classes.”
From at least July 2012 through August 2017, RBC recommended and sold certain customers more expensive mutual fund share classes when less expensive share classes in the same funds were available, the SEC had claimed.
In an order that the SEC announced Friday, the regulator said RBC made the recommendations in question without disclosing that it would receive greater compensation from the customers’ purchases of the more expensive share classes. The order further found that RBC did not disclose that the more expensive share classes would negatively impact the overall return on the investments because of the different fee structures for the different mutual fund share classes, the SEC said.