Brokerage Firm Alert: Our Investment Fraud Attorneys Are Investigating Royal Alliance Associates, Inc.
Did You Lose Money Because of Royal Alliance? Are You Aware of Complaints and Fines Against Royal Alliance?
Updated on: December 27, 2023
Royal Alliance Associates, Inc. (“Royal Alliance”) (CRD # 23131) is a broker-dealer and has been the subject of at least forty-seven (47) complaints filed by regulatory organizations like FINRA and many more by investors like yourself. At Patil Law, we have investigated Royal Alliance, its regulatory complaints and fines, and its customer complaints. If you’ve invested your hard-earned money with Royal Alliance, you should be very concerned about any regulatory actions, regulatory fines, or customer complaints against your brokerage firm.
Our team of attorneys specialize in representing investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors. As an investor, you may be entitled to compensation for losses accrued due to mismanagement of your investments.
If you believe you have a claim against Royal Alliance, you should strongly consider hiring an investment fraud lawyer and not wait until it’s too late to file a claim. Reach out to our legal team via the secure and private online form or call our firm directly toll-free at 1-800-950-6553 for a free consultation so that we can discuss your case and see what we can do to help you get the compensation you need and deserve. We do not charge anything for the ability to discuss your matter and evaluate your potential case.
Jump to Topic
Do I Have an Investment Fraud Case Against Royal Alliance?
How To File a Claim Against Royal Alliance To Get Your Money Back
Client Complaints – Is Your Financial Advisor on This List?
Did Misconduct By a Royal Alliance Advisor Impact Your Investments? What Can You Do?
Royal Alliance Has Many Regulatory Complaints and Fines
A Closer Look Into Royal Alliance’s Regulatory Issues
Next Steps and Free Consultation with Our Legal Team
Do I Have an Investment Fraud Case Against Royal Alliance?
✅ YES, if you’ve experienced financial losses due to the actions or misconduct of Royal Alliance or its staff, you have the right to pursue legal action against them. You can sue Royal Alliance but the odds are you signed away your right to sue in court and agreed to resolve your dispute in a FINRA arbitration proceeding.
FINRA arbitration proceedings are generally private proceedings that can last anywhere from a few months to approximately a year. Our attorneys have personal experience in representing clients in FINRA arbitration proceedings and know very well how you can not only sue Royal Alliance in FINRA arbitration proceedings, but WIN that arbitration. The easiest way to know if you have a case against Royal Alliance is to reach out to our legal team at Patil Law via the secure and private online form or call us toll-free at 1-800-950-6553 for a complimentary consultation.
Who is Royal Alliance?
Royal Alliance (CRD # 23131) is a registered broker-dealer. It operates as a full-service independent broker-dealer, providing a range of financial products and services to individual investors and financial advisors. As a registered broker-dealer, Royal Alliance is subject to regulations and oversight by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
It is required to comply with industry standards and regulations to ensure the protection of its clients’ interests. A failure to comply with industry standards by either its brokers or the firm itself can result in disciplinary actions, fines, or other penalties imposed by regulatory authorities.
How To File A Claim Against Royal Alliance To Get Your Money Back
If you have questions about Royal Alliance, its advisors, or the management or performance of your accounts, please contact our legal team at Patil Law via the secure and private online form or call us toll-free at 1-800-950-6553 for a free and complimentary initial consultation. Our attorneys have experience handling well over a thousand securities arbitration claims, and our law firm has successfully recovered over $25 million for our clients to date.
We understand the stress that comes along with realizing that your financial advisor or brokerage firm has made poor decisions with your money. We can help you, as we have helped hundreds of other clients in the past.
Client Complaints – Is Your Financial Advisor on This List?
There have been scores of customer complaints filed against Royal Alliance stockbrokers and investment advisors over the years. Many of these complaints deal with financial advisor misconduct, poor or unsuitable investment recommendations, failure by these brokerage firms to supervise their employees (the financial advisors), and general fraud against consumers. We have launched many investigations of current and former Royal Alliance advisors:
- Annetta Marie Box currently barred (previously with Royal Alliance and Securities America)
- Corrie Ann Mitchell currently barred (previously with Royal Alliance)
- Scott Steven Brown with Royal Alliance (previously with Osaic Wealth and 1st Global Advisors)
- Les Leroy Barber Jr with Royal Alliance (previously with Lincoln Financial Advisors Corporation and The Lincoln National Life Insurance Company)
- William Calvin Collins with (previously with)
- Adam Russell Beck with Royal Alliance (previously with Osaic Wealth and Collins Financial Planning)
- Ryan Thomas Fleming with Royal Alliance (previously with Osaic Wealth and Hornor, Townsend & Kent)
- Grant Eric Tolman with Royal Alliance (previously with Signator Investors and Transamerica Financial Advisors)
- Salvatore Stephen Aprile with Royal Alliance (previously with Signator Investors and Metlife Securities)
- Thomas Povinelli with Royal Alliance (previously with Osaic Wealth and Prime Capital Services)
- Lois Anne Davies with Royal Alliance (previously with Signator Investors and John Hancock Mutual Life Insurance Company)
- Gary Kendall Liska with Royal Alliance (previously with SEIA and Signature Estate Securities and Signator Investors)
- Payam Taghibagi with Royal Alliance (previously with SEIA and Signature Estate Securities and Osaic Wealth)
- Michael Martin Wasylyshyn with Royal Alliance (previously with Kemper Securities Group and Prescott, Ball, & Turben)
- Dennis Todd Rife with Royal Alliance (previously with Osaic Wealth and Walnut Street Securities)
- Donald Alde Joyal with Royal Alliance (previously with Flagship Wealth Advisors and Park Avenue Securities)
- Espen Stoud Platou with Royal Alliance (previously with Osaic Wealth and Hornor, Townsend & Kent)
- Fabio Francis Battaglia Jr Royal Alliance (previously with Signator Investors and John Hancock Mutual Life Insurance Company)
- Fernando A Pohina with Royal Alliance (previously with Hornor, Townsend & Kent and Prudential Financial)
- Jeffrey A Thorup with Royal Alliance (previously with Focus Financial and Workman Securities Corporation)
- Jennifer Lynn Scroggins with Royal Alliance (previously with Signator Investors and Riverstone Wealth Management)
- Lisa Lynn Waterman with Royal Alliance (previously with Signator Investors and Transamerica Financial Advisors)
- Sharon Kwan with Globalink Securities (previously with Royal Alliance and National Planning Corporation)
- William Hoffman currently unaffiliated (previously with Osaic Wealth and Royal Alliance)
- Kevin Curry with Cadaret, Grant & Co. (previously with Royal Alliance and Petersen Investments)
- Maryanne Bessler with LPL Financial (previously with Investors Capital Advisory and Royal Alliance)
- Michael Schwartz with Ameriprise Financial (previously with Cetera Advisor Networks and Royal Alliance)
- Hillary Wertlieb with American Portfolios Financial Services (previously with Cetera Advisors and Royal Alliance)
- Michael Fetzner with LPL Financial (previously with Royal Alliance and Summit Financial Services)
Did Misconduct By a Royal Alliance Advisor Impact Your Investments?
If you have lost money investing with any of these Royal Alliance advisors or others within this brokerage firm, it’s important that you reach out to an investment loss attorney quickly because the statutes of limitations can bar your claims. Call our legal team at Patil Law toll-free at 1-800-950-6553 or reach out to us via the secure and private online form for a free initial consultation.
Royal Alliance Has Many Regulatory Complaints and Fines
There have been approximately forty-seven (47) state and self-regulatory body disclosure events against Royal Alliance; that is, final and formal proceedings initiated by a regulatory authority like the U.S. Securities and Exchange Commission (SEC) or self-regulatory body like the Financial Industry Regulatory Authority (FINRA) for a violation(s) of investment-related rules or regulations. In addition, there have been countless customer complaints filed against Royal Alliance for misconduct by its securities sales and investment advisory representatives that are not reported by the firm on its Central Depository Record.
Our legal team at Patil Law has reported and written about these regulatory problems and customer complaints over many years. A few of the notable FINRA Sanctions for its Supervisory Failures are below.
A Closer Look Into Royal Alliance’s Regulatory Issues
Royal Alliance has been repeatedly censured, warned, and fined for its own misconduct and failure to supervise its army of financial advisors. Details of forty-seven (47) regulatory issues are listed below:
Fined $122,845.59 for Alleged Supervisory Failures In Ensuring All Eligible Customers Received Applicable Sales Charge Waivers or Special Share Classes (AWC No. 2021069460901)
Overview from FINRA’s Disciplinary Office:
From September 2015 to September 2020, Securities America, Royal Alliance, and SagePoint failed to establish and maintain a supervisory system reasonably designed to ensure that all eligible customers received applicable sales charge waivers or special share classes in connection with rolling over 529 plans from one state plan to another. Some customers who were eligible for these waivers or special share classes did not receive them. Therefore, Respondents violated MSRB Rule G-27.
As more fully described below, FINRA credits Respondents for their extraordinary cooperation. Accordingly, this AWC includes an undertaking to pay restitution totaling approximately $515,000 plus interest, and censures, but no fines.
Fined $35,000 for Alleged Failure to Inform About GPB Capital’s Failure to Submit Necessary Filings with the Securities and Exchange Commission (AWC No. 2018060895801)
Overview from FINRA’s Disciplinary Office:
Between May 4, 2018, and June 29, 2018, FSC Securities, Royal Alliance, SagePoint Financial and Woodbury Financial negligently failed to tell investors in an offering related to GPB Capital Holdings, LLC (GPB Capital) that the issuer failed to timely make required filings with the Securities and Exchange Commission, including filing audited financial statements. By virtue of the foregoing, each firm violated FINRA Rule 2010.
Fined $224,362.66 for Alleged Supervisory Failures Regarding Suitability of Share Classes for 529 Plan Investments (AWC No. 2019062531501)
Overview from FINRA’s Disciplinary Office:
From January 1, 2013 through June 30, 2018, Royal Alliance, Sagepoint, and FSC failed to establish and maintain a supervisory system reasonably designed to supervise 529 plan share-class recommendations in violation of MSRB Rule G-27. These three Advisor Group firms shared written supervisory procedures that did not reasonably address the share-class suitability factors specific to 529 plan investments. In addition, the firms’ transaction review system was not reasonably designed to identify 529 plan share-class recommendations that were inconsistent with the investment time horizon suggested by the age of the account beneficiary.
The firms voluntarily self-reported potential issues with their supervisory system to FINRA as part of the 529 Plan Share Class Initiative announced in Regulatory Notice 19- 04 and proposed a plan to remediate affected customers. Accordingly, the AWC includes a censure for each firm and orders of restitution and estimated interest totaling $485,441 but no fines.
Fined $400,000 for Alleged Supervisory Failures Allowing a Representative to Steal Customer Funds (AWC No. 2017056769402)
Overview from FINRA’s Disciplinary Office:
Between 2009 and 2017 (the Relevant Period), two registered representatives at Royal Alliance, acting independently of each other, stole customer funds by directing wire transfers or checks from customer accounts into accounts for entities they created. Some of the transfers were made in violation of firm policies and procedures for third-party payments, which the firm failed to enforce, and in some instances the transfers were also accompanied by red flags to which the firm failed to reasonably respond. By virtue of the foregoing, Royal Alliance violated NASD Rules 3010 and 3012(a)(2) and FINRA Rules 3110, 3110(c)(2), and 2010.
Fined $350,000 for Alleged Supervisory Failures In Overseeing Sale of Multi-Share Class Variable Annuities (AWC No. 2016047636601)
Overview from FINRA’s Disciplinary Office:
Royal Alliance (between February 2014 and December 2015) and FSC, SagePoint, and Woodbury (between January 2013 and December 2014) failed to establish, maintain and enforce a supervisory system and written procedures designed to reasonably supervise representatives’ sale of multi-share class variable annuities and failed to provide training to their representatives and principals on the sale and supervision of multi-share class variable annuities. As a result, the Advisor Group Firms violated FINRA Rules 2330(d) and (e), NASD Rule 3010 (for conduct before December 1, 2014), F1NRA Rule 3110 (for conduct on and after December 1, 2014), and FINRA Rule 2010.
In addition, Royal Alliance (between February 2014 and March 2016) failed to reasonably supervise variable annuity exchanges in that it failed to implement a reasonable supervisory system and procedures to determine if any of its registered representatives had inappropriate rates of variable annuity exchanges. As a result, Royal Alliance violated FINRA Rule 2330(d), NASD Rule 3010 (for conduct before December 1, 2014), FINRA Rule 3110 (for conduct on and after December 1, 2014), and FINRA Rule 2010.
Fined $150,000 for Allegedly Disadvantaging Certain Retirement Plan and Charitable Organization Customers (AWC No. 2016049977701)
Overview from FINRA’s Disciplinary Office:
Between January 1, 2011, and September 30, 2017 (the “Relevant Period”), RAAI disadvantaged certain retirement plan and charitable organization customers that were eligible to purchase Class A shares in certain mutual funds without a frontend sales charge (“Eligible Customers”). These Eligible Customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. During this period, RAAI failed to establish and maintain a supervisory system and procedures reasonably designed to ensure that Eligible Customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, RAAI violated NASD Conduct Rule 3010 (for misconduct before December 1, 2014), FINRA Rule 3110 (for misconduct on or after December 1, 2014), and FINRA Rule 2010.
Fined $260,000 for Allegedly Applying an Inaccurate Accounting And Net Capital Treatment Of Investment Advisory Fees (AWC No. 2016049751001)
Overview from FINRA’s Disciplinary Office:
Between January 2010 and April 2016, Royal Alliance, FSC and SagePoint, and between January 2014 and March 2016, Woodbury applied an inaccurate accounting and net capital treatment of investment advisory fees. Subsequent adjustments to correct the net capital computations resulted in hindsight net capital deficiencies for Royal Alliance, FSC and SagePoint, and books and records violations and financial reporting inaccuracies across the Firms. During the time period of the violations discussed herein, Fields was the acting FINOP for the Firms.
Fined $225,000 for Alleged Supervisory Failures in Applying Sales Charge Discounts to Certain Customers’ Eligible UIT Purchases (AWC No. 2012034450501)
Overview from FINRA’s Disciplinary Office:
From May 2009 to April 2014 (The Relevant Period), Royal Alliance failed to apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (UITs) in violation of FINRA Rule 2010. Additionally, the firm failed to establish, maintain and enforce a supervisory system and written supervisory procedures (WSPs) reasonably designed to ensure that customers received sales charge discounts on all eligible UIT purchases in violation of NASD Conduct Rule 3010.
From April 2009 through June 2011, the firm failed to reasonably supervise registered representative GK in violation of NASD Conduct Rule 3010 and FINRA Rule 2010.
From January 2009 through April 2013, the firm failed to establish, maintain and enforce a supervisory system and WSPs reasonably designed to ensure that registered representatives furnished customers with a prospectus for UIT investments in violation of NASD Conduct Rule 3010 and FINRA Rule 2010.
Fined $175,000 for Alleged Supervisory Failures Allowing Two Representatives to Associate With The Firm at a Time When They Were Statutorily Disqualified (AWC No. 2009017644201)
Overview from FINRA’s Disciplinary Office:
This matter relates to Royal Alliance permitting Peter J. Bonnell and Linda Bakalis Schurr to associate with the firm at a time when they were statutorily disqualified.1 As a result of state regulatory actions brought against Bonnell and Schurr, both were subject to statutory disqualifications beginning in August 2008. Despite this, Royal Alliance allowed Bonnell and Schurr to be associated with the firm until March 2009.
The state regulatory actions that gave rise to the statutory disqualifications were based on outside activities conducted by Bonnell and Schurr while they were registered representatives at Royal Alliance. Bonnell and Schurr operated a business, known as Investors Union, which sent mass mailings stating “you may have an annuity that has reached the end of its surrender period” to individuals regardless of whether that was true and used responses to those postcards to sell leads to other brokers.
In addition, between approximately October 2006 and March 2009, Royal Alliance failed to file or timely make Form 3070 and Uniform Application for Securities Industry Registration or Transfer (Form U4) filings concerning the state regulatory actions against Bonnell and Schurr.
Royal Alliance also failed to adequately supervise Bonnell and Shurr to ensure that they made required disclosures regarding their outside business activities at Investors Union. Bonnell and Schurr misrepresented their outside business activities to Royal Alliance as an insurance agency engaged in the sale and marketing of insurance and failed to disclose the regulatory actions related to Investors Union. However, Royal Alliance was aware of facts suggesting that Bonnell and Schurr had not adequately disclosed their outside activities and the regulatory actions against them. Despite this, the firm failed to take appropriate action to determine whether those activities needed to be disclosed.
As a result, Royal Alliance violated:
- Article HI, Section 3(b) of the FINRA Bylaws of the Corporation, NASD Rule 2110, and FINRA Rule 2010 by allowing Bonnell and Schurr to associate with the firm between August 2008 and March 2009 while they were statutorily disqualified;
- Article V, Section 2(c) of the FINRA Bylaws of the Corporation, NASD Rules 3070 and 2110, and FINRA Rule 2010 by failing to timely and accurately make required Form 3070 and Form U4 filings relating to certain state regulatory actions against Bonnell and Schurr; and
- NASD Rules 3010 and 2110 and FINRA Rule 2010 by failing to reasonably supervise Bonnell and Schurr to ensure that Bonnell and Schurr made required disclosures regarding their outside business activities and state regulatory actions involving Investors Union.
Fined $50,000 for Alleged Supervisory Failures In Making Fair and Reasonable Purchases or Sales of Municipal Securities (AWC No. 2005000157701)
Overview from FINRA’s Disciplinary Office:
NASD Rules 1021, 2110, MSRB Rules G-3, G17, G-27, G-30 – Royal Alliance Associates, Inc. failed to purchase municipal securities for its own account from a customer or sell municipal securities for its own account to a customer at an aggregate price (including any markdown or markup) that was fair and reasonable, taking into consideration all relevant factors, including the best judgment of the firm as to the fair market value of the securities at the time of the transaction and of any securities exchanged or traded in connection with the transaction, the expense involved in effecting the transaction, the fact that the firm was entitled to a profit and the total dollar amount of the transaction. The firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable Securities Laws, Regulations and MSRB Rules concerning the firm’s fair pricing of and markups on municipal bond transactions. The firm’s supervisory system did not include written supervisory procedures providing for reviews for compliance with MSRB Rule G-30. The firm was unable to produce sufficient evidence to FINRA of completion of such supervisory steps. The firm failed to ensure that one of its corporate officers who managed the trader that executed the municipal transactions and was assigned supervisory responsibilities as oversight of equity and fixed-income trades of the firm’s trading desk, was properly registered as either a municipal securities principal or general securities principal.
Fined $200,000 for Alleged Supervisory Failures Allowing a Representative Previously Linked to The Firm, Make Inappropriate Mutual Fund Recommendations And Provide Misleading Information When Advising Clients (AWC No. E052004030102)
Overview from FINRA’s Disciplinary Office:
In May 2007, FINRA issued findings against Ogden L. Coody, a registered representative formerly associated with Royal Alliance Associates, Inc. Coody made unsuitable mutual fund recommendations and misrepresentations in connection with the recommendations. As a result of this misconduct, Coody was barred from the securities industry. Specifically, between January 1, 2001 and August 1, 2004, Ogden L. Coody recommended a series of 167 unsuitable mutual fund switches and exchanges in three accounts jointly held by public customers SM, MG, and JD, without having a reasonable basis for recommending the switches and exchanges. Coody’s actions resulted in payment by the customers of over $75,600 in unnecessary mutual fund fees and in Coody’s receipt of commissions totaling $51,963.
Royal Alliance failed to have supervisory systems in place that were sufficient to detect the unsuitable switches and exchanges made by Coody. Under the supervisory system in place between January 1, 2001 and August 1, 2004, the principals approving Coody’s trading activity only had ready access to transaction activity for daily or monthly periods. Because of the limits on the information available for review, it was difficult for principals to detect patterns of short-term holding if a purchase occurred in one month and the sale occurred a month later. The system was also inadequate to detect Coody’s failure to take advantage of cost-free exchanges, rights of accumulation, and customer savings available through the use of letters of intent or rights of accumulation. In some instances, Royal Alliance also failed to ensure that customers received switch letters disclosing costs or fees associated with the switch of one mutual fund A share for another.
Fined $250,000 for Alleged Supervisory Failures In Providing Certain Investors The Opportunity to Purchase Class A Shares Of Certain Mutual Funds At Net Asset Value (“NAV”) (AWC No. EAF0401080003)
Overview from FINRA’s Disciplinary Office:
From January 1, 2002 through December 31, 2004 (“the relevant period”), Royal Alliance failed to provide certain investors the opportunity to purchase Class A shares of certain mutual funds at net asset value (“NAV”). In particular, certain mutual funds offered “NAV Transfer Programs” that allowed investors to purchase Class A shares at NAV and not pay any sales charges, if the customer invested proceeds from the redemption of shares of another mutual fund within specified time frames and previously had paid either a front-end or back-end sales charge.
During the relevant period, Royal Alliance failed to exercise reasonable due diligence to identify the essential terms and conditions of the NAV Transfer programs of certain mutual funds, and failed to establish, maintain and enforce a system and procedures to ensure that its customers received NAV pricing when appropriate. As a result, certain investors who were eligible to purchase Class A shares under NAV Transfer Programs (1) purchased Class A shares and incurred front-end sales charges that they should not have paid, and/or (2) purchased other share classes of these mutual funds and thereby became subject to back-end sales charges, also known as contingent deferred sales charges (“CDSCs”), as well as higher ongoing distribution and service fees (“Rule 12b-l fees” or “fees”), typically associated with share classes other than Class A.
Fined $20,000 for Alleged Supervisory Failures In Reporting to TRACE (AWC No. 2005001402301)
Overview from FINRA’s Disciplinary Office:
NASD Rules 2110, 3010 – Royal Alliance Associates, Inc. failed to report to TRACE transactions in trace-eligible securities executed on a business day during trace system hours within 30 minutes of the time of execution; and the firm’s supervisory system did not provide for supervision reasonably designed to achieve compliance with applicable Securities Laws, Regulations and NASD Rules concerning TRACE.
Fined $100,000 for Alleged Supervisory Failures In Complying With Orders And Duties (AWC No. E8A20010343)
Overview from FINRA’s Disciplinary Office:
NASD Conduct Rules 2110 and 3010- Respondent firm, acting through an employee, failed to establish, maintain and enforce a supervisory system reasonably designed to achieve compliance with the plan of supervisory procedures and operating restrictions and failed to properly supervise the statutorily disqualified registered representative (SDRR) to ensure compliance with the heightened supervision that was specifically ordered in a notice.
Fined $6,600,000 for Alleged Bias Towards or Against the Sale of Mutual Fund Shares Based on Brokerage Commissions (AWC No. CE2050011)
Overview from FINRA’s Disciplinary Office:
This matter involves violations of NASD Rule 2830(k), which prohibits member firms from favoring or disfavoring the sale or distribution of mutual fund shares on the basis of brokerage commissions received by the firm, prohibits member firms from arranging for a specific amount or percentage of brokerage commissions to be directed to the firm conditioned on the firm’s sale of mutual fund shares, and prohibits member firms from recommending the purchase of mutual fund shares on the basis of brokerage commissions received or expected to be received by the firm from any source.
From January 2001 through December 2003, Respondents maintained shelf space (or revenue sharing) programs in which participating mutual fund complexes paid a fee in return for preferential marketing and distribution access to Respondents. The benefits provided to the mutual fund complexes included enhanced access to the firms’ sales force, placement of materials on the firms’ websites, and inclusion of the funds in certain marketing materials prepared or distributed by Respondents to their sales forces. Twelve of the participating fund complexes paid all or some of their fees for participating in the programs by directing approximately $41.5 million in mutual fund portfolio brokerage commissions to the Respondents. Those payments violated NASD Conduct Rules 2830(k) and 2110.
In addition, the Respondents failed to maintain e-mails for the time period required by the books and records rules. As a result, the Respondents violated Sec. 17(a) of the Securities Exchange Act of 1934, Rule 17a-4 thereunder, and NASD Conduct Rules 3110 and 2110.
Fined $100,000 for Alleged Supervisory Failures In Obtaining Verification By An Independent Public Accountant Of Client Funds and Securities (Docket/Case Number: 3-21758)
Overview from FINRA’s Disciplinary Office:
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted against Osaic Wealth, Inc. (“Osaic Wealth” or “respondent”). In anticipation of the institution of these proceedings, respondent has submitted an offer of Settlement (the “offer”) which the Commission has determined to accept. The Commission finds that this matter arises out of the failure of Osaic Wealth, a registered investment adviser, to obtain verification by an independent public accountant of client funds and securities of which it had custody. From June 2017 to December 2022 (the “relevant period”), Osaic Wealth used a form agreement to govern certain aspects of the relationship among Osaic Wealth, its clients, and a particular clearing agent Osaic Wealth used (the “clearing agent”). Each of these agreements (“customer agreements”) included a margin account agreement that contained language, required by the clearing agent, that permitted the clearing agent to accept, without inquiry or investigation, any instructions given by Osaic Wealth concerning these clients’ accounts (the “affected accounts”). As a consequence of Osaic Wealth having this authority with respect to the client funds and securities in the affected accounts, Osaic Wealth had custody of these assets. Accordingly, because Osaic Wealth failed to obtain verification by actual examination of the client funds and securities in the affected accounts by an independent public accountant, Osaic Wealth violated Section 206(4) of the Advisers Act and Rule 206(4)-2 thereunder, commonly referred to as the “custody rule.”
Fined $250 for Allegedly Failing to Respond To The Insurance Commissioner’s Inquiry of Whether They Were Charging Fees To Insureds (Docket/Case Number: 22-0089)
Overview from FINRA’s Disciplinary Office:
The Insurance Commissioner contacted Royal Alliance licensing team in 2021 to ask if it was charging fees to insureds but did not receive a response. In February 2022 the Insurance Commissioner issue order revoking License No 21-0736, however later agreed to accept a fine and current response in order to keep the license active. The order revoking License No 21-0736 was rescinded,the fine was paid and a current response was submitted.
Fined $500,000 for Alleged Supervisory Failures In Implementing Policies And Procedures That Prevent Unsuitable Investments (Docket/Case Number: 3-20152)
Overview from FINRA’s Disciplinary Office:
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 203(E) and 203(K) of the Investment Advisers Act of 1940 (“Advisers Act”) against Royal Alliance Associates, Inc. (“respondent” or “Royal Alliance”).
The Commission finds that this matter concerns Royal Alliance’s failure to adopt and implement policies and procedures reasonably designed to prevent unsuitable investments in volatility-linked Exchange-Traded Products (“ETPs”). As a result, the Investment Adviser Representatives of Royal Alliance (“IARS”) used their discretionary authority over client accounts to buy and hold a complex ETP for time periods that were inconsistent with the purpose of the product as described in its offering materials.
During the period from January 2016 through April 2020 (the “relevant period”), certain Royal Alliance IARs on behalf of advisory accounts bought and held for extended periods a security called Ipath S&P 500 VIX short-term futures ETN (“VXX”). VXX attempts to track the implied volatility of the S&P 500 index (the “S&P 500”) through the use of short-term futures contracts. As disclosed in the VXX prospectus, the constant buying and selling of these contracts by the issuer creates roll costs in most instances. As the roll costs are deducted from VXX’s returns, its value was likely to-and, in fact did decrease when held longer than very short periods, even if the futures index that VXX tracks was flat or positive from the start to end of that period.
During the relevant period, approximately 108 accounts of Royal Alliance’s advisory clients held VXX for periods extending to several months and, in some cases, years. The increased risk from the extended holding periods resulted in significant losses in the affected accounts.
During the relevant period, while Royal Alliance had policies and procedures that cautioned against holding other similarly risky complex and structured products for extended periods, Royal Alliance had no policies or procedures concerning products designed to track the implied volatility of the S&P 500. Likewise, while Royal Alliance trained its representatives concerning the risks of these other products, it provided no training on volatility ETPs like VXX, even though it knew that certain of its IARS were trading these products for their clients.
Under the circumstances described above, Royal Alliance violated Section 206(4) of the Advisers Act and Advisers Act Rule 206(4)-7.
Fined $250,000 for Alleged Supervisory Failures In Overseeing Written Policies And Procedures Regarding Federal Fund Wires And Standing Instructions
Overview from FINRA’s Disciplinary Office:
During the relevant period, Royal Alliance’s written policies and procedures regarding federal fund wires and standing instructions constituted a failure to reasonably supervise.
Fined $190,000 for Alleged Supervisory Failures In Addressing Red Flags To Fraudulent Fund Withdrawals (Docket/Case Number: COM2018-00011)
Overview from FINRA’s Disciplinary Office:
The State alleged that, with regard to one former Royal advisor and one customer, the firm failed to address red flags to fraudulent fund withdrawals over a period of time, and that there was a failure and lapse in the supervision of the advisor.
Fined $50,000 for Alleged Supervisory Failures In Overseeing Sale of Fixed Annuity Product (Docket/Case Number: E-2018-0093)
Overview from FINRA’s Disciplinary Office:
Royal Alliance failed to supervise its registered representatives in the sale of a fixed annuity product to its customers.
Fined $7,500,000 for Alleged Supervisory Failures In Compliance And Breach Of Fiduciary Duties (Docket/Case Number: 3-17169)
Overview from FINRA’s Disciplinary Office:
SEC Admin Release 34-77362, IA Release 40-4351 / March 14, 2016: The Securities and Exchange Commission deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 15(B) of the Securities Exchange Act of 1934 and Sections 203(E) and 203(K) of the Investment Advisers Act of 1940 against the firm (respondent). On the basis of this order and respondent’s offer, the Commission finds that this proceeding arises from breach of fiduciary duty and multiple compliance failures by respondent. From at least 2012 to 2014, respondent invested advisory clients in mutual fund share classes with 12B-1 fees instead of lower-fee share classes of the same funds that were available without 12B-1 fees. The affected clients were advisory clients whom advisor group firms invested in a fee-based advisory service called the advisor managed portfolio (“AMP”) in accounts that are not qualified retirement or ERISA accounts, where 12B-1 fees are rebated. In its capacity as broker-dealers, respondent received 12B-1 fees paid by the funds in which AMP Advisory clients invested. By investing these non-qualified advisory clients in the higher-fee share classes, respondent and two other firms received approximately $2 million in 12B-1 fees that they would not have collected from the lower-fee share classes. Respondent failed to disclose in its forms ADV or otherwise that it had a conflict of interest due to a financial incentive to place non-qualified advisory clients in higher-fee mutual fund share classes. As a result, respondent breached its fiduciary duties as an investment adviser to certain of its AMP advisory clients by investing them in higher-fee mutual fund share classes. In addition, respondent failed to adopt any compliance policy governing mutual fund share class selection. During 2013, respondent also failed to monitor advisory accounts quarterly for inactivity or “reverse churning” as required under its compliance policies and procedures to ensure that fee-based advisory or “wrap” accounts that charged an inclusive fee for both advisory services and trading costs remained in the best interest of clients that traded infrequently. Even though Commission Examination Staff previously had cited the firm for failing to conduct such monitoring several years earlier, respondent did not conduct its inactive account review on a timely basis for the fourth quarter of 2012 and the first and second quarters of 2013. By virtue of this conduct, respondent willfully violated sections 206(2), 206(4) and 207 of the Advisers Act and Rule 206(4)-7 thereunder.
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Fined $21,000 for Alleged Supervisory Failures Regarding The Sale of Certain Variable Annuity Products (Docket/Case Number: 15.0229)
Overview from FINRA’s Disciplinary Office:
Royal Alliance Associates, Inc. was alleged to have been deficient in its ability to demonstrate supervision procedures in place for the sale of certain variable annuity products, in violation of Nevada Administrative Code 668A.460(2)during the time period January 1, 2001 through December 31,2012.
Fined $25,000 for Allegedly Selling Non-Traded REITs (Docket/Case Number: E-2013-0044)
Overview from FINRA’s Disciplinary Office:
Royal Alliance, through its registered representatives, sold non-traded REITs in excess of Massachusetts heightened concentration limits imposed by the prospectus.
Fined $10,000 for Alleged Supervisory Failures Resulting To Fraudulent Activities (Docket/Case Number: 0800047)
Overview from FINRA’s Disciplinary Office:
The Department’s investigation into this matter, as it relates to respondents Royal Alliance, Dirk Salberg and Marcus Carbajal, determined that the underlying facts of this matter consist of unique circumstances in which respondent Mark J. Barati, not affiliated with Royal Alliance, had used his knowledge of the securities industry’s general policies and procedures as well as his relationship with respondents Salberg and Carbajal to manipulate the circumstances so that he could defraud certain investors. In particular, Barati sold investors’ two promissory notes for $1,200,000.00 by convincing the investors to borrow on margin through their brokerage accounts held at Royal Alliance. Barati obtained the investors’ signatures on appropriate documents to allow for margin and to direct the borrowed money be transferred into a bank account held by Barati. Barati submitted certain documents with respondent Salberg and others with respondent Carbajal. Soon after obtaining investors’ money Barati fled Illinois. Respondents Royal Alliance, Dirk Salberg & Marcus Cabajal entered a consent order of censure with the Department wherein they agreed to pay investors approximately 45% of their losses pursuant to a private settlement & they agreed without admitting or denying the facts or conclusions of law, that the Department would find a violation of Section 11. A of the Illinois Securities Law or 1953 for not properly recording the above-described transaction in the Royal Alliance blotter & ledger. These respondents also paid for the Departments’ investigation into this matter.
Fined $5,000 for Alleged Supervisory Failures In Overseeing Representative (Docket/Case Number: I10-172-BLM)
Overview from FINRA’s Disciplinary Office:
Respondent’s representative failed to follow the respondent’s policies and procedures when he invested such customer’s money into a REIT investment for which said investments were unsuitable.
Fined $500,000 for Alleged Supervisory Failures Allowing A Representative To Operate A Ponzi Scheme and Defrauding Clients (Docket/Case Number: 3-13456)
Overview from FINRA’s Disciplinary Office:
SEC Administrative Release 34-59830, April 28, 2009: The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 15(B)(4) of the Securities Exchange Act of 1934 against Royal Alliance Associates, Inc. (“RAA”) based on its failure to reasonably supervise an employee with a view to preventing and detecting his violations of the Federal Securities Laws. The Commission found that RAA’s employee operated a Ponzi Scheme and defrauded investors by lying about purchases and sales of securities, by misappropriating funds for his personal use, and by sending certain investors falsified statements relating to their investment accounts. The Commission found that RAA failed to establish and implement systems and procedures that would reasonably be expected to prevent and detect the employee’s violations of the Federal Securities Laws.
Fined $5,000 for Allegedly Employing An Unregistered Investment Adviser (Docket/Case Number: I-09-10-07-255)
Overview from FINRA’s Disciplinary Office:
Unregistered Investment Adviser.
Fined $750,000 for Alleged Supervisory Failures Allowing A Representative to Misappropriate Client Funds And Prepare Fraudulent Statements (Docket/Case Number: CO-2007-7033-S)
Overview from FINRA’s Disciplinary Office:
The February 26, 2007 Consent Order alleged that the firm failed to adequately supervise the activities of Kevin O. Kelley (CRD Number 1183995), an ex-agent of the firm who, among other things, purportedly misappropriated client funds and prepared fraudulent statements that improperly inflated the value of client holdings. In late 2006, Kelley had been sentenced in Manhattan Federal Court to 170 months in prison for defrauding senior citizen clients of approximately $4.2 million. Kelley had been permanently barred by the department from conducting securities business in Connecticut on August 23, 2005.
Fined $11,000 for Alleged Supervisory Failures In Accepting Or Declining In Transactions In Eligible Securities (Docket/Case Number: CMS040142)
Overview from FINRA’s Disciplinary Office:
NASD Conduct Rule 2110 and NASD Marketplace Rule 6130(B) – respondent member failed to accept or decline in act transactions in eligible securities within 20 minutes after execution.
Fined $150,000 for Alleged Supervisory Failures (Docket/Case Number: 3-11538/REL 33-8438)
Overview from FINRA’s Disciplinary Office:
SEC Admin Proc File No. 3-11538, RELS 33-8438, 34-49982, Dated July 8, 2004 – The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 (“Securities Act”) and Section 15(B) of the Securities Exchange Act of 1934 (“Exchange Act”) against Royal Alliance Associates, Inc. in anticipation of the institution of these proceedings, respondent has submitted an offer of settlement (the “offer”) which the commission has determined to accept.
Fined $13,000 for Allegedly Transacting Business From Unregistered Branch Offices (Docket/Case Number: CO-01-6315-S)
Overview from FINRA’s Disciplinary Office:
Commencing in 1994 and 1995, respectively, the firm allegedly transacted business from 2 unregistered branch offices in violation of Section 36B-6(D) of the Connecticut Uniform Securities Act notwithstanding an October 14, 1992 stipulation and agreement obligating the firm not to transact business from any Connecticut place of business unless that location was effectively registered as a branch office.
Fined $400,000 for Alleged Supervisory Failures Allowing Agents To Sell Unregistered Securities (Docket/Case Number:)
Overview from FINRA’s Disciplinary Office:
Two agents, while employed by Royal Alliance and operating the Toms River, NJ branch office of R.A., sold unregistered securities in their own company, Prime Money Management, Inc. in violation of N.J.S.A. 49:3-60. Royal Alliance failed to supervise the agents pursuant to N.J.S.A. 49:3-58.
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Fined $20,000 for Allegedly Allowing Inactive Individuals To Act As Registered Persons Without Completing Required Education (Docket/Case Number: C10000146)
Overview from FINRA’s Disciplinary Office:
NASD Rules 1120(A) and 2110 – Respondent member, acting through an individual, allowed other individuals associated with the firm to act in the capacity of registered persons while their registration statuses with the NASD were inactive due to their failure to complete the regulatory element of NASD’s continuing education requirement.
Fined $5,000 for Allegedly Failing to Accept Or Decline Act Transactions In Eligible Securities (Docket/Case Number: CMS000094)
Overview from FINRA’s Disciplinary Office:
NASD Rules 2110 and 6130(B)- Respondent member failed to accept or decline in act transactions in eligible securities within 20 minutes after execution.
Fined $15,000 for Alleged Supervisory Failures Allowing A Representative To Sell Unregistered And Fictitious Securities (Docket/Case Number: 99-330)
Overview from FINRA’s Disciplinary Office:
Edgar H. McGrath, Jr. (CRD #871042), a former registered rep of Royal Alliance, sold more than $550,000 in unregistered and fictitious securities to at least 13 Royal Alliance clients and clients of McGrath & Associates, while he was an agent of Royal Alliance. Royal Alliance reimbursed more than $550,000 in out of pocket losses.
Fined $10,000 for Alleged Supervisory Failures In Enforcing Established Procedures
Overview from FINRA’s Disciplinary Office:
Failed to establish adequate written procedures and to enforce procedures which had been established.
Fined $500 for Alleged Net Capital Deficiency
Overview from FINRA’s Disciplinary Office:
Net Capital Deficiency.
Fined $3,000 for Alleged Supervisory Failures In Overseeing An Unlicensed Agent Conducting Business (Docket/Case Number: 943-F)
Overview from FINRA’s Disciplinary Office:
Failure to register an investment adviser agent who was conducting business while unlicensed.
Fined $4,200 for Alleged Supervisory Failures In Overseeing That Representatives Are Properly Licensed
Overview from FINRA’s Disciplinary Office:
The Commonwealth of Virginia alleged that Royal Alliance failed to ensure that one of its registered representatives was properly licensed as an advisory representative in violation of Sec.13.1-504C of the Virginia Code.
Fined $1,041 for Alleged Supervisory Failures In Overseeing That Representatives Are Properly Licensed
Overview from FINRA’s Disciplinary Office:
The Commonwealth of Virginia alleged that Royal Alliance failed to ensure that one of its registered representatives was properly licensed as an advisory representative in violation of Sec 13.1-504C of the Virginia Code.
Fined $13,120.13 for Alleged Unregistered Branch Activity (Docket/Case Number: DBF 2881-S-11/99)
Overview from FINRA’s Disciplinary Office:
Unregistered branch activity.
Fined for Alleged Supervisory Failures (Docket/Case Number: 99-0190 SC)
Overview from FINRA’s Disciplinary Office:
On June 23, 1999, the Indiana Securities Division filed its administrative action against respondents Royal Alliance, Avallone, and Bilotta. In its complaint the Division alleges that Royal Alliance and Bilotta failed to reasonably supervise Avallone, who transacted business in the State of Indiana without the benefit of registration.
Fined $25,000 for Alleged Supervisory Failures Allowing Representative To Engage In Unsuitable and Excessive Trading (Docket/Case Number: C10990005)
Overview from FINRA’s Disciplinary Office:
(NASD Rule 3010 – respondent member and respondent Travis failed to adequately supervise the activities of a registered representative, resulting in the representative engaging in unsuitable and excessive trading).
Fined $50,000 for Alleged Supervisory Failures
Overview from FINRA’s Disciplinary Office:
Failure to supervise.
Fined $7,500 for Alleged Supervisory Failures In Overseeing Transactions by An Unregistered Adviser (Docket/Case Number: ST-92-2280-5)
Overview from FINRA’s Disciplinary Office:
Alleged violation of Section 36-474(c) of the Connecticut Uniform Securities Act in connection with the transacting of business by an affiliated unregistered investment adviser and failure to supervise off premise activities.
Fined $500 for Allegedly Failing to Amend A U-4 Application On Time (Docket/Case Number: 9000104)
Overview from FINRA’s Disciplinary Office:
Illinois has entered a consent order of censure against the above referenced respondent. Findings of fact and conclusions of law are that respondent failed to timely amend a U-4 application to reflect a material change of circumstances with regard to one of respondent’s salespersons.
Next Steps and Free Consultation with Our Legal Team
If you have questions about Royal Alliance, its advisors, or the management or performance of your accounts, please contact our team at Patil Law toll-free at 1-800-950-6553 for a free initial consultation. Or please reach out to us through our secure and private contact form and we will call you back quickly to discuss your case.
Our attorneys have experience handling well over a thousand securities arbitration claims, and our law firm has successfully recovered over $25 million for our clients to date. We understand the stress that comes along with realizing that your financial advisor or brokerage firm has made poor decisions with your money.
We can help you, as we have helped hundreds of other clients in the past. We are happy to serve you as well as to provide you with a custom report of your advisor’s and your brokerage firm’s complaints.