RBC Capital Markets, LLC - S-25-3999-25-CO01 - Consent Order

1 STATE OF WASHINGTON DEPARTMENT OF FINANCIAL INSTITUTIONS 2 SECURITIES DIVISION 3 IN THE MATTER OF DETERMINING Order No. S-25-3999-25-CO01 Whether there has been a violation of the 4 Securities Act of Washington by: CONSENT ORDER 5 RBC Capital Markets, LLC, Respondent. 6 7 INTRODUCTION 8 Pursuant to the Securities Act of Washington, RCW 21.20 (the “Act”) and the regulations promulgated 9 thereunder (the “Regulations”), the Securities Division of the Department of Financial Institutions (“Securities 10 Division”) and Respondent RBC Capital Markets, LLC (“RBC” or “Respondent”) do hereby enter into this 11 Consent Order in settlement of the matters alleged herein. 12 As the result of a coordinated investigation, with the Securities Division serving as a lead state, the 13 Securities Division concluded that Respondent charged unreasonable commissions in excess of 5% of the 14 principal amount on certain small principal equity transactions. Nationwide, Respondent charged 15 commissions in excess of 5% of the principal amount on approximately 89,900 equity transactions over a 16 five-year period totaling approximately $3,400,000. Respondent submitted an Offer of Settlement to the 17 Massachusetts Securities Division and executed a term sheet with Alabama, Iowa, Massachusetts, Missouri, 18 Montana, Texas, and Washington. 19 This Order is submitted solely for the purpose of settlement and with the understanding that it will not 20 be used in any proceeding unless it is accepted by the Securities Division as hereafter set forth. If this Order 21 is not accepted by the Securities Division, the Order is withdrawn and shall not be used in or become part of 22 any proceeding. If the Order is accepted, it will conclude the Security Division’s investigation and any civil 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 1 1 or administrative action that could be commenced pursuant to the Act for the specific violations resolved 2 herein, solely as it relates to Respondent. This includes any investigations and any civil or administrative 3 actions that could be commenced relating to the charging of minimum commissions in connection with trades 4 in any security or product type, not limited to equity securities. 5 Respondent neither admits nor denies the findings of facts and conclusions of law set forth below, 6 agrees to the representations and undertakings set forth below, and consents to the entry of a Consent Order 7 (the “Order”) by the Securities Division thereby settling the above-captioned matter with prejudice. This order 8 is necessary or appropriate in the public interest or for the protection of investors and consistent with the 9 purposes fairly intended by the policy and provision of the Act. 10 FINDINGS OF FACT 11 Respondent 12 1. Respondent RBC Capital Markets, LLC is a broker-dealer registered in Washington with a 13 principal place of business in New York, New York. Respondent is identified by Financial Industry 14 Regulatory Authority (“FINRA”) CRD No. 31194. Respondent maintains seven branch offices in Washington 15 state. 16 Nature of the Conduct 17 A. Respondent’s Minimum Commission Practices for Equity Transactions Failed to Ensure Transactions Were Executed at a Fair and Reasonable Price 18 2. Except as otherwise expressly stated, the conduct described herein occurred during the time 19 period of May 16, 2020 to May 16, 2025 (the “Relevant Time Period”). 20 3. During the Relevant Time Period, Respondent charged unreasonable commissions in excess 21 of 5% of the principal amount to retail brokerage customers on certain equity transactions. 22 4. Respondent charged a minimum fixed commission on exchange traded equity transactions. 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 2 1 5. For all equity transactions executed during the Relevant Time Period, Respondent generally 2 charged retail brokerage customers between 0.5% to 4.0% of the principal amount of the trade. 3 6. Respondent generally charged a minimum commission of $95 for equity buy and sell 4 transactions (the “Minimum Equity Commission”). 5 7. Certain small equity sell transactions resulted in a minimum commission below $95. 6 8. Respondent’s policies and procedures note that its commission schedule was designed so that 7 the majority of equity transactions would result in a commission of less than 5% of the principal amount of 8 the transaction. 9 9. However, Respondent’s policies and procedures exempted transactions where the commission 10 exceeded 5% of the principal amount if the commission charged was less than the Minimum Equity 11 Commission. 12 10. FINRA Rule 2121 Supplementary Material .01 (Rule 2121.01) provides a guideline of five 13 percent for determining whether a commission is unfair or unreasonable. However, the “5% Policy” is a guide, 14 not a rule. A commission pattern of five percent or even less may be considered unfair or unreasonable. 15 11. In Washington, Respondent executed 4,109 equity transactions that included an unreasonable 16 commission for services performed (i.e. in excess of 5% of the principal trade amount) totaling $160,610.84. 17 12. Numerous equity transactions executed by Respondent included a commission well in excess 18 of 5% of the principal value of the transaction. 19 B. Respondent Did Not Reasonably Supervise Transactions Which Applied the Minimum Equity Commission 20 13. Respondent did not reasonably supervise certain transactions, which included a Minimum 21 Equity Commission charge, to ensure that Respondent charged its customers a reasonable commission. 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 3 1 14. Respondent’s trade review system was not set to flag transactions where the commission 2 exceeded 5% of the principal amount if the commission charged was less than the Minimum Equity 3 Commission. 4 15. Respondent did not have in place surveillance sufficient to supervise small principal equity 5 transactions where the Minimum Equity Commission was in excess of 5%. 6 16. Respondent’s surveillance system excluded transactions which applied the Minimum Equity 7 Commission from reviews. 8 17. As a result, Respondent failed to adequately supervise small principal equity transactions 9 where the Minimum Equity Commission was in excess of 5%. 10 C. Respondent Self-Reported to FINRA and Remediated Its Systems 11 18. On March 23, 2023, Respondent filed a Form 4530 disclosure with FINRA voluntarily 12 reporting that it had identified certain equity transactions where the Minimum Equity Commission had been 13 charged resulting in commissions that exceeded 5% of the principal amount. 14 19. Respondent updated its commission schedule and adjusted the parameters of its trade review 15 system to flag any commissions that exceed 5% of the principal amount. Respondent has also updated its 16 policies and procedures accordingly. 17 CONCLUSIONS OF LAW 18 20. Respondent RBC Capital Markets, LLC is a broker-dealer as defined in RCW 21.20.005(1). 19 21. Pursuant to WAC 460-20C-150 and in accordance with RCW 21.20.110(j), it is a violation of 20 the Securities Act for a registered broker-dealer firm to fail to establish and maintain a system to reasonably 21 supervise its agents. 22 22. Respondent’s acts and practices, as described above, constitute a violation of WAC 460-20C- 23 150 and is grounds for a censure, fine, costs, and restituion pursuant to RCW 21.20.110(1)(j). CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 4 1 Based upon the foregoing and finding it in the public interest: 2 CONSENT ORDER 3 Respondent in full settlement of these matters neither admits nor denies the Findings of Fact, and 4 neither admits nor denies the Conclusions of Law, makes the following representations, and agrees to the 5 undertakings herein as part of the Offer: 6 IT IS HEREBY AGREED AND ORDERED: 7 A. The Respondent shall permanently cease and desist from conduct described herein in violation of 8 WAC 460-20C-150; 9 B. The Respondent is censured by the Securities Division; 10 C. The Respondent shall provide restitution in an amount of no less than $160,610.84 providing the 11 amount of the commission on certain small principal equity transactions that exceeded five percent 12 5% of the principal trade amount during the Relevant Time Period to the affected Washington 13 customers identified in the multistate investigation, plus interest in the amount of 6% compounded 14 annually from the date of the transaction to the end of the Relevant Time Period. Respondent 15 agrees to provide restitution within one hundred and twenty (120) days of execution of the order: 16 i. Respondent agrees that restitution shall be in the form of a dollar credit to current customer 17 accounts, or a bank check for all former customers or current customers who are entitled to 18 restitution as a result of transactions involving an individual retirement account; 19 ii. Respondent agrees to provide a notice of restitution to customers on terms not unacceptable 20 to Massachusetts, Montana, Missouri, Alabama, Washington, Texas, and Iowa (the “Multi- 21 State Group”) (“Notice”). The Notice shall be sent prior to or with the distribution of any restitution. Within forty-five (45) days of the mailing of the Notice, Respondent shall 22 provide the Securities Division with a list of all Washington residents for whom Respondent 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 5 1 receives a restitution payment as returned to sender. To the extent the Securities Division 2 has access to different address information, the Respondent shall mail the payment and a 3 second Notice to each Washington resident within thirty (30) days of the Securities Division 4 providing such different address; and 5 iii. Respondent agrees to, within forty-five (45) days of and the date of this Order, submit to 6 the Securities Division, a report detailing the restitution paid pursuant to the Order, which shall include: 7 a. Identification of all restitution payments; and 8 b. Dates, amounts, and methods of the transfer of funds for all restitution payments. 9 D. The Respondent shall pay an administrative fine in the amount of $25,000 to the Securities 10 Division within fifteen (15) days following the date of entry of this Order. Payment shall be: (1) 11 made by United States postal money order, certified check, bank cashier’s check, bank money 12 order, or wire; (2) made payable to the Washington Department of Financial Institutions; (3) either 13 hand-delivered, mailed to the Washington Department of Financial Institutions; or wired per the 14 Securities Division’s instructions; and (4) submitted under cover letter or other documentation that 15 identifies payment by Respondent and the docket number of the proceeding; 16 E. The Respondent agrees that a person not unacceptable to the Multi-State Group has certified in 17 writing to the Securities Division that Respondent has undertaken the following; 18 i. Updated its commission schedule to reflect that commissions on equity transactions do not 19 exceed 5% of the principal trade amount; 20 ii. Adjusted the parameters of its trading system and corresponding controls to flag any 21 commissions that exceed 5% of the principal amount; and 22 iii. Amended its policies and procedures to reflect and incorporate these changes. 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 6 1 F. The Respondent shall not claim, assert, or apply for a tax deduction or tax credit with regard to 2 any state, federal, or local tax for any administrative fine amounts that Respondent shall pay 3 pursuant to this Order; 4 G. The Respondent shall not seek or accept, directly or indirectly, reimbursement or indemnification, 5 including, but not limited to, any payments made pursuant to any insurance policy, with regard to 6 any amount that Respondent shall pay pursuant to this Order; 7 H. If Respondent is the subject of a voluntary or involuntary bankruptcy petition under Title 11 of the 8 United States Code within three hundred sixty-five (365) days of the entry of this Order, 9 Respondent agrees to provide written notice to the Securities Division within five (5) days of the 10 date of the petition; 11 I. The Respondent agrees that any fine, penalty, and/or money that Respondent shall pay in 12 accordance with this Order is intended by Respondent and the Securities Division to be a 13 contemporaneous exchange for new value given to Respondent pursuant to 11 U.S.C. § 14 547(c)(1)(A) and is, in fact, a substantially contemporaneous exchange pursuant to 11 U.S.C. § 15 547(c)(1)(B); 16 J. The Respondent agrees that, upon the issuance of an Order by the Securities Division that contains 17 the terms as set forth above, if Respondent fails to comply with any of the terms set forth in the 18 Order, the Securities Division may institute an action to have this Order declared null and void. 19 Additionally, after a fair hearing and the issuance of an order finding that Respondent has not 20 complied with the Order, the Securities Division may move to have the Order declared null and 21 void, in whole or in part, and re-institute the associated proceeding that had been brought against 22 Respondent; and 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 7 1 K. For good cause shown, the Securities Division may extend any of the procedural dates set forth 2 above. Respondent shall make any requests for extensions of the procedural dates set forth above 3 in writing to the Securities Division. 4 WAIVER 5 Respondent hereby waives all rights to contest an Order entered by the Securities Division pursuant to 6 this Order, including, but not limited to, (A) the right to contest whether the Order is fair, reasonable, and/or 7 in the public interest, (B) the right to contest the Order’s findings of fact, and (C) the right to contest the Order’s 8 conclusions of law. Respondent further waives the procedural due process right to a hearing, all procedural 9 rights and the right to seek judicial review of the Order pursuant to RCW 21.20.440 of the Act and under the 10 provisions of the Administrative Procedures Act, Chapter 34.05 RCW. 11 NO DISQUALIFICATION 12 This Order waives any disqualification in the Washington laws, or rules or regulations thereunder, 13 including any disqualification from relying upon the registration exemptions or safe harbor provisions to which 14 Respondent may be subject. This Order is not intended to be a final order based upon violations of the Act that 15 prohibit fraudulent, manipulative, or deceptive conduct. This Order is not intended to form the basis of any 16 disqualifications under Section 3(a)(39) of the Securities Exchange Act of 1934; or Rules 504(b)(3) and 17 506(d)(1) of Regulation D, Rule 262(a) of Regulation A and Rule 503(a) of Regulation CF under the Securities 18 Act of 1933. This Order is not intended to form the basis of disqualification under the FINRA rules prohibiting 19 continuance in membership and is not intended to trigger any requirement that Respondent must file a MC- 20 400A application to remain a member in good standing or to trigger any disqualification under SRO rules 21 prohibiting continuance in membership. This Order is not intended to form a basis of a disqualification under 22 204(a)(2) of the Uniform Securities Act of 1956 or Section 412(d) of the Uniform Securities Act of 2002. 23 Except in an action by the Securities Division to enforce the obligations of this Order, any acts performed or CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 8 1 documents executed in furtherance of this Order: (a) may not be deemed or used as an admission of, or evidence 2 of, the validity of any alleged wrongdoing, liability, or lack of any wrongdoing or liability; or (b) may not be 3 deemed or used as an admission of; or evidence of, any such alleged fault or omission of Respondent in any 4 civil, criminal, arbitration, or administrative proceeding in any court, administrative agency, or tribunal. 5 6 WILLFUL VIOLATION OF THIS ORDER IS A CRIMINAL OFFENSE. 7 8 Signed this 20 day of February 2026. 9 10 Signed by: RBC Capital Markets, LLC 11 12 /s/Sean O’Conner Sean O’Conner 13 Managing Director, Chief Compliance Officer, RBC Wealth Management 14 15 Approved as to form by: 16 /s/Emily Renshaw 17 Emily Renshaw. Morgan, Lewis & Brockius LLP Attorney for RBC Capital Markets, LLC 18 19 SIGNED and ENTERED this 1 day of April 2026 20 21 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 9 1 2 3 4 5 /s/ __________________________________ 6 Faith L. Anderson Acting Securities Administrator 7 Approved by: Presented by: 8 9 /s/ /s/ Brian J. Guerard Keenan Osborne 10 Chief of Enforcement Financial Legal Examiner 11 Reviewed by: 12 ___/s/_______________________ 13 Holly Mack-Kretzler Financial Legal Examiner Supervisor 14 15 16 17 18 19 20 21 22 23 CONSENT ORDER DEPARTMENT OF FINANCIAL INSTITUTIONS Securities Division PO Box 41200 Olympia, WA 98504-1200 360-902-8760 10