The Massachusetts Securities Division fined RBC Capital Markets $200,000 for allegedly failing to oversee a broker-dealer who excessively directed the client funds of several seniors into a set of energy sector securities.
Massachusetts Commonwealth Secretary William Galvin’s office argued RBC’s failure to supervise Bruce Cameron left “investors vulnerable to significant decreases in the production or supply of natural resources,” according to the Secretary’s office. Galvin’s office filed a set of consent orders against both Cameron and RBC Capital Markets for the broker’s alleged conduct that occurred between 2013 and 2017.
According to the consent order, Cameron had worked as a broker-dealer agent since 1970 before joining with RBC in 2002 and worked with the accounts of at least 42 Massachusetts households during the time in question. Over time, Cameron increasingly began offering some clients the option to invest in “Master Limited Partnerships (MLPs),” according to the order.
MLPs are a type of limited partnership that can be traded on public exchanges and are often tied to the energy sector. The potential risk in such an investment is that decreases in natural resource production or supply can have a disproportionately negative impact that eventually affects investors.
In the case of some investors, their account holdings invested in MLPs and related securities approached 100 percent. Over the four-year period, Cameron eventually invested more than $30 million in client assets into these MLPs or other energy-related opportunities. In all, Cameron’s alleged unsuitable trades affected at least 10 investors, with ages between 66 and 85 years old, annual incomes that ranged from under $50,000 to more than $500,000, and disclosed liquid net worth spanning between less than $100,000 up to $3 million.
According to Galvin’s order, RBC failed to oversee Cameron’s conduct, even though policies were in place to ensure that recommendations are suitable for a client’s needs. The Securities Division specifically knocked the firm for failing to oversee Cameron’s overreliance on investments in the energy sector.
“While heavy weighting in a single security or sector may be considered more appropriate for an aggressive investor than a moderate or conservative investor, diligent supervision should be performed in situations where an account has more than 20% of the portfolio invested in a single security or more than 30% in a single sector irrespective of the investment objective,” the order read, quoting RBC policy.
"We fully cooperated with the investigation and voluntarily reached a resolution that we believe is appropriate. We note that in agreeing to the Order we did not admit to any supervisory deficiencies and believe that the customers’ account investments were appropriately supervised and were consistent with their stated investment goals and financial circumstances as well as RBC’s policies. The customer accounts generated substantial income for the customers that exceed the commissions charged," a RBC spokesperson said in a statement. "After 50 years in the financial services industry, Bruce Cameron voluntarily retired in 2020 having been the subject of only one customer complaint throughout his 50 year career, nor was he the subject of any prior regulatory discipline. RBC and Mr. Cameron settled this matter in the interests of customer relations and to avoid the costs, uncertainties and distractions associated with litigation."
In addition to the fine, Galvin censured RBC and ordered the firm to work to reimburse clients affected by Cameron’s actions.
Cameron retired in October of last year and agreed not to reapply to register for the securities industry “in any capacity” in the Bay State.