Royal Alliance – FINRA Complaints & Regulatory Actions
The White Law Group is investigating potential securities claims involving broker dealer Royal Alliance Associates (CRD#: 23131, Jersey City, New Jersey.)
Royal Alliance Associates, LLC, headquartered in Jersey City, New Jersey, is dually registered as an investment adviser and broker-dealer. The firm reportedly has 78 disclosure events on its broker report, including 42 regulatory events, 29 arbitrations and 7 bonds.
SEC Fines Royal Alliance Associates
November 2020 – The Securities and Exchange Commission (SEC) fined Royal Alliance Associates $500,000 after allegations of widespread losses for advisory clients in connection with unsuitable investments in volatility-linked exchange-traded products (ETPs).
According to a cease and desist order, Royal Alliance’s allegedly failed to adopt and implement policies and procedures reasonably designed to prevent unsuitable investments in volatility-linked exchange traded products . As a result, the investment adviser representatives of Royal Alliance purportedly used their discretionary authority over client accounts to buy and hold a complex ETP for time periods that were inconsistent with the purpose of the product as described in its offering materials.
Between January 2016 and April 2020 certain Royal Alliance reps on behalf of advisory accounts allegedly bought and held for extended periods a security called iPath S&P 500 VIX Short–Term Futures ETN (“VXX”). VXX attempts to track the implied volatility of the S&P 500 Index through the use of short-term futures contracts. According to the VXX prospectus, the constant buying and selling of these contracts by the issuer creates roll costs in most instances.
According to the order, “As the roll costs are deducted from VXX’s returns, its value was likely to—and, in fact did—decrease when held longer than very short periods, even if the futures index that VXX tracks was flat or positive from the start to end of that period.”
Further, during the relevant period, approximately 108 accounts of Royal Alliance’s advisory clients allegedly held VXX for periods extending to several months and, in some cases, years. The increased risk from the extended holding periods resulted in significant losses in the affected accounts.
This isn’t the first time Royal Alliance Associates has had issues with regulators.
January 2020 – Royal Alliance Associates, was censured and fined $400,000 for allegedly failing to catch two former brokers who separately stole more than $3.8 million from the accounts of four customers and are now imprisoned.
In a Letter of Acceptance, Waiver & Consent (AWC) on January 16, FINRA alleged that between 2009 and 2017, a New Jersey broker purportedly wire-transferred $1.4 million in more than 60 transactions from a New Hampshire widow who was reportedly disabled, to the bank account of his limited liability company and to a law firm.
Royal Alliance purportedly failed to stop the transfers, despite the company’s address being the same as the broker’s office, firm prohibitions against third-party wire transfers, and other red flags.
The broker also purportedly forged requests for unauthorized third-party checks from the widow and another client’s account without the firm purportedly verifying the address the checks were sent to, according to FINRA.
FINRA also reportedly alleged that a Massachusetts broker stole more than $2.3 million from two customers between June 2013 and June 2017 by purportedly forging 65 third-party wire transfer requests from their accounts to the bank account that the broker allegedly controlled.
FINRA claimed that when one cashiering group employee questioned a discrepancy in signatures, the broker allegedly claimed that the customer signed her name differently each time, without further investigation. The ex-broker also allegedly falsified papers when questions were raised about the account receiving the checks, which had the broker’s home address.
The AWC did not identify the brokers but said both pled guilty to criminal charges and are barred from the securities industry.
January 2019 – Massachusetts Regulators charge Royal Alliance with Failure to Supervise
The state of Massachusetts charged Royal Alliance Associates with failure to supervise broker Stephen F. Davis of Barrington, R.I. who recommended unsuitable investments to a couple, costing the investors nearly $60,000.
The Massachusetts securities regulators allege Davis breached his fiduciary duty when he advised two investors in 2015 to exchange an annuity three years before its expiration for another annuity with a much lower interest rate.
The allegations also claim that Davis failed to file paperwork for the exchange in a timely manner leading to $15,000 in penalties for the couple, while the broker received more than $17,000 in commissions. The couple reportedly also lost more than $43,000 in interest.
July 2015 – Royal Alliance was ordered to pay $1.4 million to three separate retired investors due allegations of negligence while supervising sales of non traded real estate investment, trusts, and variable annuities.
The retirees, who were all reportedly former employees of AT&T Inc., were allegedly advised by Kathleen Tarr, a former broker, that they should take a lump-sum buyout from their employer and invest it into Inland Real Estate, a non traded REIT, and unspecific variable annuities.
A FINRA arbitration panel reportedly granted the award at more than $1 million in compensatory damages along with $25,000, per investor, in punitive damages and $241,000 in costs and legal fees.
Broker Misconduct and Customer Complaints
All broker-dealers have a responsibility to adequately supervise its employees. They must ensure the necessary procedures and systems to detect misconduct. Brokerage firms that fail to monitor the business activities of their employees may be liable for investment losses due to negligent supervision for the misconduct of their employees.
When brokers violate securities laws, such as making unsuitable investments, the brokerage firm they are working with may be liable for investment losses through FINRA Arbitration.
There have been several cases of registered representatives employed by Royal Alliance Associates who were allegedly involved in broker misconduct and fraudulent activities.
November 2018 – Former Royal Alliance advisor Kimberly Kitts reportedly pleaded guilty to charges filed by the U.S. Attorney for the District of Massachusetts, of wire fraud, investment adviser fraud, and aggravated identity theft. She was reportedly sentenced to 87 months in prison and ordered to pay $3,085,939 in restitution.
Kitts allegedly stole $3,000,000 from her clients by purportedly forging their signatures on withdrawal requests from variable annuities, forging signatures to wire funds from client brokerage accounts, and misleading clients into withdrawing funds to make fake tax payments. During the course of six years, Kitts purportedly made 82 withdrawals from seven clients’ accounts and allegedly used the money to buy several luxury automobiles and vacations for herself, according to SEC charges.
August 2018 – Royal Alliance broker Gary Basralian, of Springfield, NJ, was reportedly sentenced to 60 months in prison after pleading guilty in U.S. District Court to one count of wire fraud and one count of investment adviser fraud.
He reportedly admitted to stealing at least $2 million from clients to finance his personal expenses including payments on a BMW and thousands of dollars in credit card bills.
From July 2007 through November 2017, Basralian allegedly defrauded his clients by falsely telling them he would invest their money in securities and other investments. Instead, he purportedly used those funds for his own personal expenditures.
Basralian was registered with Royal Alliance Associates in Maplewood, NJ from January 1989 until he was permitted to resign in December 2017.
November 2017 – Former Royal Alliance broker, Angelo Talebi has 36 customer complaints filed against him during his career in the securities industry. Allegations include unsuitable recommendations among others.
Talebi was reportedly suspended in December 2015 from the securities industry and fined $10,000 for allegedly executing transactions in a customer’s online account, according to his broker report.
Customer Complaint and FINRA Award
July 2015 – Customer Complaint and FINRA Award- Royal Alliance was ordered to pay $1.4 million to three separate retired investors due allegations of negligence while supervising sales of non traded real estate investment, trusts, and variable annuities.
The retirees, who were all reportedly former employees of AT&T Inc., were allegedly advised by Kathleen Tarr, former Royal alliance broker, that they should take a lump-sum buyout from their employer and invest it into Inland Real Estate, a non traded REIT, and unspecific variable annuities. A FINRA arbitration panel reportedly granted the award at more than $1 million in compensatory damages along with $25,000, per investor, in punitive damages and $241,000 in costs and legal fees.
Tarr, who was reportedly discharged from the firm in 2010, reportedly has 33 customer complaints filed against her for allegations of unsuitable investment recommendations, among others.
Free Consultation with a Securities Attorney
The foregoing information, which is all publicly available, is being provided by The White Law Group. The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois.
If you have concerns regarding investments you purchased through Royal Alliance Associates and would like to speak with a securities attorney, please call The White Law Group at 888-637-5510.
For more information on The White Law Group, visit www.whitesecuritieslaw.com.