RBC Capital Markets, a Canadian investment bank, has agreed to pay $450,000 for failing to review accounts held by James Hankins, Jr. Hankins used the RBC accounts in a Ponzi scheme which cost investors $19 million. While Hankins told investors he would use their money to buy the rights of life insurance policy beneficiaries, he used the money to live a lavish lifestyle, including private plane trips, wine, jewelry, home improvements and a $3.5 million home in Jupiter, Florida.
According to the Consent Order between RBC and the Bureau, RBC’s policies required that it conduct monthly reviews of customer accounts that the bank’s compliance department had flagged for scrutiny. RBC failed to do so in Hankins’ case. Hankins’ accounts were open from December 2004 to October 2006, during which time he moved in and out “substantial” sums of investor money and engaged in day trading. By March 2006, the required monthly reviews of Hankins’ accounts were reported as overdue between 162 and 253 days, according to the Consent Order between RBC and the Bureau.
“RBC failed to follow its own procedures that are designed to monitor account activity,” said state Attorney General Jeffrey Chiesa, whose office oversees the Bureau of Securities, in a statement. “In this case, the bank’s failure may have cost investors severely.”
RBC will pay $300,000 in disgorgement to the Bureau, which will be distributed to Hankins’ investors. The remaining $150,000 is s a civil penalty, $50,000 of which is payable to the Bureau and $100,000 is suspended due to RBC’s cooperation with the State.
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 in 2009 to criminal charges resulting from his Ponzi scheme, and currently is serving a 20-year prison sentence.
“Proper supervision is a critical function that broker-dealers are obligated to perform under our state securities law,” said Abbe R. Tiger, chief of the New Jersey Bureau of Securities. “Failure to supervise removes an important safeguard that investors count on to protect their hard-earned monies.”
If you were a victim of Hankins’ scheme, please contact Sonn Law Group to explore your legal options. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 844-689-5754 or complete our “contact form.”