According to FINRA, RBC Capital Markets, LLC was fined $300,000, ordered to pay $128,643.17 in restitution to customers, and required to disgorge $653,312.83 for failing to establish adequate supervisory systems regarding suitability obligations for syndicate preferred stock trading.

The firm failed to adequately monitor for short-term trading in preferred stock despite written procedures calling for supervisors to closely examine such activity. While the firm's surveillance system had alerts specifically monitoring for short-term trading in products like closed-end funds, it had no alerts that specifically monitored for short-term trading in preferred stock. The firm also lacked alerts to flag the purchase and sale within 180 days of syndicate preferred stock.

Representatives at RBC recommended that retail customers purchase syndicate preferred stocks and then sell the positions within 180 days, resulting in customer losses. The firm earned $653,313 in selling concessions from syndicate purchases and $128,643 in sales commissions from the subsequent sales. Despite conducting substantial syndicate preferred stock business, RBC did not maintain reasonable supervisory systems to monitor whether representatives were recommending unsuitable short-term trading for the purpose of capturing commissions.

This case demonstrates the importance of firms having surveillance systems tailored to all products they offer. Short-term trading in preferred stocks can be unsuitable for investors due to transaction costs and the income-oriented nature of these securities. Investors should be aware that recommendations to frequently trade preferred stocks may indicate a conflict of interest where the firm profits from commissions at the investor's expense.