The Financial Industry Regulatory Authority announced that it had fined the former Ferris, Baker Watts LLC $500,000 for inadequate supervision of sales of reverse convertible notes to retail customers.
FINRA also sanctioned the firm, which has been acquired by Royal Bank of Canada's wealth management arm, for unsuitable sales of reverse convertibles to 57 accounts held by customers who were at least 85 years old and customers with a modest net worth.
The firm was ordered Wednesday to pay nearly $190,000 in restitution to the 57 account holders for net losses incurred as a result of buying reverse convertibles.
"Reverse convertible notes are complex investments that often entail significant risk of loss and also involve terms, features and risks that can be difficult for retail investors to evaluate," said James Shorris, an executive vice president at FINRA and acting chief of enforcement. "Ferris, Baker's inadequate written procedures resulted in recommendations of sales to customers for whom the purchase of these securities was not suitable."
