Royal Alliance changed its name to Osaic Wealth (CRD #: 23131) on June 21, 2023. Osaic’s website boasts that the firm employs 10,500 financial professionals and has $500 billion under administration. The broker-dealer was originally established in 1988. Its main office is in Jersey City, New Jersey.
Besides its previous identity as Royal Alliance, Osaic Wealth also operates under 141 d.b.a. names. Visit Osaic Wealth’s BrokerCheck record for the complete list.
Settlements and Regulator Allegations
Investors should be aware that Royal Alliance has 85 disclosures on its record, including regulatory actions. These include allegations that the firm’s failure to supervise allowed brokers to recommend unsuitable products to investors. Below please find a handful of the most recent regulatory actions brought against the firm:
529 Plan Share-Class Recommendation Allegations
529 accounts allow investors to save for college expenses. They offer tax breaks but also typically feature fees for non-education-related withdrawals.
January 2023 Allegations
On January 24, 2023, Royal Alliance consented to the findings that it failed to establish and maintain a supervisory system reasonably designed to ensure that all eligible customers received applicable sales charge waivers or special share classes in connection with rolling over 529 plans from one state plan to another.
As a result, FINRA alleged that Royal Alliance failed to apply sales charge waivers or purchase class AR shares in approximately 41% of 529 plan rollover transactions, impacting approximately 500 accounts in which rollover purchases totaled approximately $7 million. This allegedly caused customers to unnecessarily pay $235,000 in sales charges and fees.
Royal Alliance consented to a censure and a restitution payment of $234,831.92 plus interest.
You can read the entire Acceptance, Waiver, and Consent agreement (AWC) here. AWCs are settlements between firms and FINRA. These agreements allow firms to consent to findings without admitting to or denying the allegations.
December 2021 Allegations
There is another regulatory action related to 529 plan share-class recommendations from December 2021. The firm’s supervisory system allegedly did not address the relationship between the account beneficiary’s age and the number of years the funds would be needed to pay qualified higher education expenses.
The firm was ordered to pay $224,362.66, plus interest, in restitution to customers.
You can read a copy of the AWC here.
Alleged Omission of Material Information Concerning an Investment
In November 2022, Royal Alliance consented to the findings that the firm negligently did not inform investors that GBP Capital had failed to make required filings with the SEC, including audited financial statements. Royal Alliance allegedly learned of the delays and the issuer’s stated intention to complete a forensic audit and still made 32 sales of GPB shares that totaled $2.45 million. These transactions allegedly earned brokers $171,500 in commissions.
As part of the terms of the Acceptance, Waiver, and Consent agreement, the firm agreed to pay $171,500 in restitution, plus interest, to the customers. The firm also paid a $35,000 fine.
Volatility-Linked Exchange-Traded Products
On November 13, 2020, the SEC alleged that Royal Alliance advisors used discretionary authority to buy and hold a complex ETP for time periods that were inconsistent with the purpose of the product as described in offering materials.
According to the Cease and Desist Order, from 2016 through 2020 the investment advisers bought and held IPath S&P 500 VIX short-term futures ETN (VXX). VXX attempted to track the volatility of the S&P 5000 Index through the use of short-term futures contracts.
The VXX prospectus indicated that the fund would decrease in value when held for longer than very short periods. The firm allegedly had no policies or procedures concerning products designed to track the volatility of the S&P 500. Royal Alliance also allegedly did not provide training on these products.
The firm consented to a civil monetary penalty of $500,000.
Royal Alliance Kurta Law Settlement
Kurta Law won a settlement against Royal Alliance Associates following allegations that the firm’s failure to supervise allowed their representatives to engage in RICO violations and conversion of investor funds.
Potentially High-Risk Products
Royal Alliance (Osaic Wealth) offers the following products, all of which may pose an unsuitable amount of risk for retail investors:
- Stocks and bonds
- Variable annuities
- Mutual funds
- Exchange-traded funds
- Alternative investment products
- Variable life insurance
- Unit Investment Trusts (UITs)
- 529 Plans
Brokerage Service Fees and Conflicts of Interest
Royal Alliance representatives are required to work in your best interest. However, there are fees associated with certain transactions, and those fees create conflicts of interest. The firm discloses the fees and conflicts of interest in the Customer Relationship Summary (Form CRS).
Transaction-Based Commissions and Fees
The commissions and fees associated with certain transactions create an incentive to recommend that you trade more often and in higher amounts.
- Brokers earn commissions based on the dollar value of the brokerage firm transaction.
- Transaction fees.
- Osaic imposes ticket charges, which are fees for buying, selling, or exchanging a security. This charge varies based on the type of security and the dollar value of the transaction.
- Clearing or custodial charges: These are fees the firm or custodian charges for servicing the account including a quarterly or annual account maintenance custodial fee. On top of these fees, Osaic may add a “markup” – the amount charged by the clearing firm or custodial agent.
These are only the brokerage service fees, and there may be other fees associated with Osaic’s advisory services.
Indirect Compensation and Revenue Sharing
Royal Alliance has an incentive to recommend certain investments. Retirement plan partners and collateralized lending partners compensate the firm when customers sign up for their products.
- Royal Alliance also receives “substantial” clearing and custodial compensation from clearing based on the number of accounts and/or the value of those accounts.
- Securities-Backed Lines of Credit (SBLOCs) provide Royal Alliance with third-party compensation from banks and clearing firms.
- Margin accounts charge investors interest on the borrowed funds.
- The firm earns money when customers roll over their retirement plans or IRAs to accounts for which Royal Alliance provides services.
- Mutual funds come with surcharges.
- The Bank Deposit Sweep Program (BDSP) and Insured Cash Account Program (ICAP) generate significant payments from banks for Royal Alliance Wealth. The compensation increases with larger deposits and as the time the deposits are held increases.
Osaic Wealth (Royal Alliance) Brokers
These are some of the most recent investor disputes that appear on Osaic Wealth (Royal Alliance) brokers’ records.
- November 2023: An investor alleged that an Osaic Wealth broker recommended a closed-end interval fund and a mutual fund that were not in her best interest.
- October 2023: According to allegations, an Osaic Wealth broker failed to disclose material information related to an annuity purchase.
- July 2023: Another Osaic Wealth investor alleged unsuitable investment recommendations.
These are just a few recent examples.
Previous Royal Alliance Investor Disputes
There are also numerous investor disputes with Royal Alliance brokers.
- In 2021, a Royal Alliance broker faced allegations of unsuitable REIT recommendations. He faced another dispute concerning allegedly unsuitable investments in an IRA portfolio.
- A Royal Alliance broker was barred in 2023 following allegations that he refused to appear for on-the-record testimony in connection that he engaged in short-term trading of mutual funds.
- This is just one of many disputes alleging misconduct involving mutual funds. One investor faced allegations that she recommended unsuitable mutual funds in two different six-figure disputes.
Royal Alliance Alleged Broker Fraud
Brokers and brokerage firms are required by securities laws to recommend investments that suit their customers’ best interests.
If you suffered losses because of a mutual fund, annuity, margin account, or other unsuitable product recommended by a Royal Alliance representative, contact our securities fraud attorneys for a free case evaluation. Call (877) 600-0098 or email firstname.lastname@example.org.