NEWARK – RBC Capital Markets, LLC, a Canadian investment bank, has agreed to a $450,000 settlement with the state Division of Consumer Affairs’ Bureau of Securities for failing to perform required reviews of accounts held by convicted securities fraudster James Hankins, Jr.
RBC failed to follow its own procedures by not performing Monthly Account Reviews on accounts opened by Hankins, according to the Consent Order between RBC and the Bureau. By March 2006, the required monthly reviews of Hankins’ accounts were reported as overdue between 162 and 253 days. Hankins used those accounts to perpetrate a multi-million dollar Ponzi scheme.
The Bureau sued Hankins in 2008 and obtained a default judgment that permanently barred Hankins from the State’s securities industry and ordered the payment of $7 million in restitution plus $220,000 in civil penalties. Hankins pled guilty to criminal charges resulting from his Ponzi scheme and is currently serving a 20-year prison sentence.
“RBC failed to follow its own procedures that are designed to monitor account activity. In this case, the bank’s failure may have cost investors severely. We will not allow such laxity to go unpunished,” Attorney General Jeffrey S. Chiesa said.
RBC will pay $300,000 in disgorgement to the Bureau, which will be distributed to Hankins’ investors. The remaining $150,000 is a civil penalty, with $50,000 payable to the Bureau and $100,000 suspended due to RBC’s cooperation with the State.
“Proper supervision is a critical function that broker-dealers are obligated to perform under our state Securities law. Failure to supervise removes an important safeguard that investors count on to protect their hard-earned monies. The Bureau of Securities will take action, as it did in this matter, when broker-dealers don’t adhere to the law or their own protocols,” said Abbe R. Tiger, Chief of the New Jersey Bureau of Securities.
On August 25, 2009, the Court entered Final Judgment by Default against Hankins and the Hankins Entities where the Court found the defendants, among other things, operated a course of business that included misappropriating investor funds for personal expenses, using new investor money to pay old investors, operating as a fraud and collecting over $19 million from investors, nearly all New Jersey residents.
Rudolph Bassman, Chief of Enforcement, and Investigator Sylvia Kolankiewicz of the Bureau of Securities conducted the investigation of this case. Deputy Attorney General Victoria A. Manning in the Securities Fraud Prosecution Section of the Division of Law represented the State in this action.
The Bureau of Securities can be contacted toll-free within New Jersey at 1-866-I-INVEST (1-866-446-8378) or from outside New Jersey at 973-504-3600. The Bureau’s website is located at www.njsecurities.gov .
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