According to FINRA, RBC Capital Markets, LLC was censured and fined $2,600,000 for failing to report, and inaccurately reporting, over-the-counter (OTC) options positions to the Large Options Positions Reporting System (LOPR).

The firm was found in violation of LOPR reporting requirements. These violations were caused by errors in the reporting logic of RBC's internal risk system used to compile and submit OTC LOPR reports, and the errors remained undetected for years. The firm failed to establish and maintain a supervisory system reasonably designed to comply with its LOPR reporting obligations. While RBC used supervisory systems to detect inaccurate LOPR reports, those systems were not designed to detect, and did not detect, instances where the firm failed to report OTC options positions to the LOPR. The firm also had no system to review whether contract quantities were reported accurately.

Additionally, the firm's written supervisory procedures identified principals responsible for conducting supervisory reviews of LOPR reports but did not provide guidance or set forth a process for how these principals should detect instances of non-reporting or confirm accuracy of reported contract quantities. The Large Options Positions Reporting System is an important regulatory tool that helps detect potential manipulative activity, excessive speculation, and concentration of risk in options markets. Member firms must report positions that meet certain thresholds to enable regulators to monitor market activity and identify potential problems.

The firm ultimately implemented multiple new surveillance reports and procedures to determine whether reportable OTC positions had been reported accurately. This case demonstrates the importance of firms not only having reporting systems but also testing those systems regularly to ensure they function correctly. Supervisory procedures must provide clear guidance to principals on how to verify compliance with reporting obligations. Investors benefit from accurate regulatory reporting because it helps regulators monitor market stability and detect manipulation or excessive risk-taking that could harm market integrity.