Brokerage Firm Review: Royal Alliance Associates, Inc.

Royal Alliance Associates, Inc. (“Royal Alliance”) (CRD# 23131) has many different complaints filed against it by the Financial Industry Regulatory Authority (“FINRA”), U.S.  Securities and Exchange Commission (“SEC”), state securities regulators, and self-regulatory organizations, and investors.  At the Law Offices of Robert Wayne Pearce, we have investigated Royal Alliance complaints, its regulatory problems, and have also represented investors with claims of fraud, negligence, and breach of fiduciary duty against this organization and its financial advisors.

If you believe you have a claim against Royal Alliance, you should strongly consider hiring an investment fraud attorney. You should not wait until it’s too late to file a claim. The Law Offices of Robert Wayne Pearce, P.A., offers free consultations. Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Can I Sue Royal Alliance Associates, Inc.?

If you’ve lost money caused by Royal Alliance and/or its employees’ misconduct then the answer is, YES,  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.  Attorney Robert Wayne Pearce has over 40 years of personal experience in FINRA arbitration proceedings and knows 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 viable case against Royal Alliance is to call Attorney Pearce at our office at 800-732-2889.

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

What is Royal Alliance Associates, Inc.?

Royal Alliance (CRD#: 23131)  was founded in 1969 and engaged in its broker-dealer and/or investment advisory businesses since that time. It is indirectly controlled by the Advisor Group, Inc. and headquartered in Jersey City, New Jersey with branch offices located throughout the United States. Its independent broker-dealer Business Model has grown through acquisition and organic development of primarily one and two person registered representative offices supervised remotely. Today there are over 800 Royal Alliance branch offices with over 2000 registered representatives in almost every state. It is now part of one of the largest broker-dealer and investment advisory firm networks in the United States with over 11,000 affiliated stockbrokers and financial advisors.

Royal Alliance Associates, Inc. has Many Different Regulatory Problems 

Royal Alliance rapid growth has not been without consequences. There have been approximately 42 Federal, state and self-regulatory body disclosure events; that is, final and formal proceedings initiated by a regulatory authority (e.g., a state or federal securities agency like the U.S. Securities and Exchange Commission (“SEC”) or self-regulatory body like the Financial Industry Regulatory Authority (“FINRA”) and the North American Securities Administrators Association (“NASAA”) for a violation(s) of investment-related rules or regulations. In addition, there have been hundreds of 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. 

We have reported and written about these regulatory problems and customer complaints over many years. Royal Alliance is a repeat offender: there are over 21 SEC and FINRA and another 21 state regulator disciplinary proceedings citing the firm with one form of supervisory lapses or another.

A BRIEF OVERVIEW OF SOME OF THE REGULATORY PROBLEMS ROYAL ALLIANCE HAS FACED OVER THE YEARS*

Royal Alliance has been repeatedly censured, warned, and fined millions for its own misconduct and failure to supervise its army of financial advisors.* A few of the notable SEC and FINRA Sanctions for its Supervisory Failures are below:

SEC Sanctions Royal Alliance Complex Exchange -Traded Product Sales Abuses

In 2020, Royal Alliance entered into an SEC Consent Order with findings related to violations of Section 206 and Rule 206(4)-7 of the Investment Advisers Act of 1940.  The SEC found that Royal Alliance did not adopt and implement policies and procedures reasonably designed to prevent unsuitable investments by its Advisory Representatives in volatility-linked exchange traded products (“ETPs”). Without admitting or denying the SEC’s findings, Royal Alliance agreed to cease and desist from committing or causing any violations and any future violations of Section 206(4) of the Advisers Act and Advisers Act Rule 206(4)-7. The Firm also agreed to pay disgorgement, prejudgment interest, and a civil monetary penalty totaling $502,400.29. The SEC noted that the Firm cooperated with the SEC and promptly took remedial steps relating to volatility linked ETPs and imposed restrictions on holding them in all client accounts maintained at the Firm.

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The SEC Sanctions Royal Alliance And Its Affiliates Almost $10 Million For Mutual Fund Share Classes and Wrap Accounts Sales Abuses

On March 14, 2016, Royal Alliance, and its affiliates, SagePoint Financial, Inc. and FSC Securities Corporation (collectively, the “Advisor Group Firms”) consented to the entry of an SEC Order Instituting Administrative and Cease and-Desist Proceedings (“Order”). The Order focuses on two specific issues related to the Advisor Group Firms fee-based advisory business. The SEC found that the Advisor Group Firms placed certain advisory clients invested in the Advisor Managed Portfolios program in mutual fund share classes with higher expense costs when lower expense cost share classes of those funds were available. The SEC found that this financial incentive, to place non-qualified advisory clients in higher fee share classes, presented a conflict of interest that should have been disclosed to clients. The SEC also concluded that the Advisor Group Firms failed to adopt written compliance policies or procedures governing mutual fund share class selection. In addition, the SEC found the Advisor Group Firms failed to timely monitor certain wrap advisory accounts for inactivity pursuant to Advisor Group’s written compliance policies and procedures. Without admitting or denying the SEC’s findings, the Advisor Group Firms agreed to cease and desist from committing or causing any violations and any future violations of Sections 206(2), 206(4) and 207 of the Investment Advisers Act and Rule 206(4)-7 thereunder and to jointly pay disgorgement of $1,956,460 and prejudgment interest of $93,399, a civil penalty of $7,500,000.

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FINRA Censures And Fines Royal Alliance For Supervisory Failures To Prevent Thefts Of Over $3.8 million From Customers

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.  FINRA censured and fined Royal Alliance $400,000 for its supervisory failures.

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Ameriprise Censured And Fined For Not Sending Account Records To Customers

FINRA investigated and found Ameriprise failed to create and send to approximately 219,000 customers an account record within 30 days of the account opening for each of these customers and therefore violated SEC Rule 17a-3, former NASD Rule 3110 (now FlNRA Rule 4511) and FINRA Rule 2010. In addition, in violation of NASD Rule 3010 and FINRA Rule 2010, Ameriprise failed to establish, maintain, and enforce a supervisory system and written supervisory procedures reasonably designed to ensure compliance with applicable laws and regulations relating to the creation and distribution of account records at account opening.

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FINRA Sanctions Royal Alliance For Excessive Unit Investment Trust Sales Charges

FINRA investigated and found that Royal Alliance failed to identify and apply sales charge discounts to certain customers’ eligible purchases of unit investment trusts (UITs) resulting in customers paying excessive sales charges of approximately $204,000. FINRA also alleged that Royal Alliance failed to establish, maintain and enforce a supervisory system and Written Supervisory Procedures (WSPs) reasonably designed to ensure that customers receive sales charge discounts on all eligible UIT purchases.  Royal Alliance paid its customers restitution and was fined for its alleged misconduct.

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FINRA Sanctions  Royal Alliance For Variable Annuity Sales Abuse

Royal Alliance, and its affiliates, FSC, SagePoint, and Woodbury (collectively, the “Advisor Group Firms”) 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 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, FINRA Rule 3110, and FINRA Rule 2010.

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Royal Alliance Sanctioned For Failing to Protect Customers From Ponzi Scheme

Royal Alliance was sanctioned by the SEC for failing reasonably to supervise a registered representative with a view to preventing and detect a Ponzi Scheme and the representatives violations of the federal securities laws During the relevant period,  the Royal Alliance registered representative operated a Ponzi scheme and defrauded at least 28 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. Royal Alliance was censured and ordered to pay a $500,000 penalty.

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FINRA Sanctions Royal Alliance For Charging Customers Unfair Municipal Bond Prices

FINRA charged Royal Alliance, a municipal securities dealer, for failing 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 conduct described in this paragraph constitutes separate and distinct violations of MSRB Rules G-17 and G-30.

FINRA also found that Royal Alliances supervisory system during the review period did not provide for supervision reasonably designed to achieve compliance with respect to the applicable securities laws and regulations, and the Rules of the MSRB, concerning the firm’s fair pricing of and markups on municipal bond transactions. The conduct described in this paragraph constitutes separate and distinct violations of MSRB Rules G-17 and G-27.

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FINRA Sanctions Royal Alliance For Mutual Fund Switching Sales Abuse

FINRA issued findings against a registered representative formerly associated with Royal Alliance because the advisor made unsuitable mutual fund recommendations and misrepresentations in connection with the recommendations. The Royal Alliance advisor recommended a series of 167 unsuitable mutual fund switches and exchanges in three accounts jointly held by public customers without having a reasonable basis for recommending the switches and exchanges which resulted in payment by the customers of over $75,600 in unnecessary mutual fund fees and commissions totaling $51,963.

FINRA also found Royal Alliance failed to have supervisory systems in place that were sufficient to detect the unsuitable switches and exchanges made by Coody. The system was also inadequate to detect the stockbrokers 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.

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FINRA Sanctions Royal Alliance For Mutual Fund Sales Charges

During 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 also 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.

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Why Does Royal Alliance Associates, Inc. Have So Many Regulatory Problems And Customer Complaints?

Independent broker-dealers are notorious for their lax supervisory practices and procedures. The business model of these franchise type operations is to open many offices nationwide for steady growth of fixed monthly revenues without the costs attendant to a full-service branch office with on-site manager, compliance officer and operation personnel. The registered representatives of these independent broker-dealers generally operate as separately incorporated businesses. They are not employees of the broker-dealer and therefore not controlled in the same manner as full-service brokerage firm representatives. The registered representatives control their structure and costs to maximize profits and often leave the protection of investors’ rights and interests as their lowest priority.

The typical supervisory organization of independent broker-dealer operations is to have other independent contractors operate Offices of Supervisory Jurisdiction (OSJs) to monitor the registered representatives from geographically remote offices and then report to the main franchisor’s compliance office at national headquarters. The supervisors at the OSJs are not employees of the franchisor and often run their own brokerage, insurance and other businesses. They are not devoted full-time supervisors of the smaller branch offices. Consequently, OSJ managers cannot and do not supervise the day-to-day operations of the registered representatives of these Independent broker-dealers. 

Generally, there is no immediate review of new accounts opened, securities transactions, business records, cash or securities receipts and deliveries, correspondence and business activities unrelated to the securities brokerage operation at these independent brokerage firms. The lax supervision leaves investors who have transferred their accounts to the smaller independent broker-dealer vulnerable to sales of securities that have not been reviewed or authorized by anyone other than the sales representative earning a commission. There may be no one onsite to detect forgeries of clients’ signatures on documents, the placement of inaccurate information about a client’s investment objectives and financial condition to document the suitability of a particular investment recommendation. Oftentimes there is no daily review of sales literature and client correspondence to protect against misrepresentations and misleading statements being made to investors. In fact, it is not unusual for there to be only one compliance audit visit per year at many of these offices.

These Independent brokerage business operations are worrisome to the North American Securities Administrators Association (NASAA), which has documented more instances of sales abuse and consequently investor losses at these firms than the traditional brokerage firms with branch offices with on-site managers and compliance personnel.

Did Royal Alliance Associates, Inc. Advisor Misconduct Cause You Investment Losses?

When financial advisor misconduct has caused you to lose substantial value to your investment accounts, you have the right to seek reimbursement from the responsible parties. Royal Alliance is responsible like any employer for its financial advisors acts and omissions. In addition, it has an independent duty to supervise its stockbrokers and investment advisors. These cases can be extremely complex, and so having the support of a reputable attorney who is experienced in recovering investment losses for investors is key to your success. Many customers make the mistake of contacting Royal Alliance without representation with an attorney about their complaints and have their complaints denied.

Related Read: Can You Sue Your Brokerage Firm?

Investment Losses? We Can Help

Discuss your legal options with an attorney at The Law Offices of Robert Wayne Pearce, P.A.

Get A Free Consultation

or, give us a ring at (800) 732-2889.

Consult With An Attorney Who Recovers Investment Losses Caused By Royal Alliance Today!

The securities lawyers at The Law Offices of Robert Wayne Pearce, P.A., have helped countless investors over the last 40 years recover the losses from their investment accounts that were caused by broker negligence or misconduct. The firm has extensive experience with Royal Alliance cases, and Attorney Pearce is committed to seeing that those responsible for the losses you have suffered are held fully accountable.

Give us a call at 800-732-2889. Let’s discuss your case and see what we can do to help you get the compensation you need and deserve.

Robert Wayne Pearce

Robert Wayne Pearce of The Law Offices of Robert Wayne Pearce, P.A. has been a trial attorney for more than 40 years and has helped recover over $170 million dollars for his clients. During that time, he developed a well-respected and highly accomplished legal career representing investors and brokers in disputes with one another and the government and industry regulators. To speak with Attorney Pearce, call (800) 732-2889 or Contact Us online for a FREE INITIAL CONSULTATION with Attorney Pearce about your case.

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