RBC Wealth Management has been ordered to pay $212,000 to the estate of a client, after an investment fraud claim was brought over claims that the firm committed elder abuse and negligence.
The complaint was filed with the Financial Industry Regulatory Authority (FINRA) in July 2015, by the estate of Hazel Kitzman, alleging that RBC Wealth Management engaged in the unauthorized sale of shares and illegally transferred funds.
FINRA is a non-governmental agency that acts as a self-regulatory agency for investment firms. It was created in July 2007, as a successor to the National Association of Securities Dealers, handling all disputes between investors and stockbrokers or other financial firms.
An elder financial abuse claim was heard by a FINRA arbitration panel, which issued a ruling (PDF) on September 8, ordering RBC to pay $212,000 in compensatory damages, plus 10% interest until the amount is paid in full. In addition, the panel denied a request by RBC to be reimbursed for its legal costs.
The decision comes about a year after FINRA announced new proposed rules to combat elder financial abuse.
The elderly financial exploitation prevention rule would apply to individuals 65 years of age or older, as well as those with mental or physical impairments that makes them unable to protect their own interests. Financial institutions would be required to make a reasonable effort to get information for a “Trusted Contact” when an elderly investor is opening a new account or updating an existing one. The contact would be unable to transact business, but would be alerted in case of suspected abusive activity on the account.
In addition, the rules would allow certain qualified individuals in the firms to place a short-term, temporary hold on account disbursements when financial exploitation is suspected. Such holds would be subject to an immediate internal review and immediate notification of the account holder, as well as the trusted contact and anyone authorized to conduct business on the account.
FINRA arbitrators resolve stock broker fraud claims that can include charges of breach of contract, breach of fiduciary duty, negligence, misrepresentation, unauthorized trading and other claims that investments were improperly handled.
The proposed rules follow a research report released by FINRA in March 2015, which found that investment fraud cases often result in non-financial harm to clients in addition to the obvious financial problems.