Publicly available records published by the Financial Industry Regulatory Authority and accessed on February 14th, 2010 indicate that New York-based brokerage and advisory firm Royal Alliance Associates has been named in a complaint by the Massachusetts Securities Division. Fitapelli Kurta is investigating allegations of misconduct against Royal Alliance Associates (CRD# 23131).
Established in Delaware in 1988, Royal Alliance Associates is headquartered in New York, New York and registered with 52 US states and territories. According to the firm’s BrokerCheck report, it has received 38 regulatory actions and 29 customer complaints that evolved into arbitration.
In January 2019, the Massachusetts Securities Division filed a complaint against the firm in connection to allegations it failed to supervise one of its brokers, Stephen F. Davis, who allegedly recommended unsuitable investments to a pair of customers and breached his fiduciary duty. According to the complaint, he allegedly recommended the couple exchange an annuity for another investment with a lower interest rate, even though the original annuity was three years away from expiring; the complaint states that he erroneously believed it would expire sooner than its actual expiration date.
The complaint states that Mr. Davis “firmly but falsely believed that Delaware Life was offering a better rate because no other available products were currently offering such a high interest rate. By failing to review a provision in their annuity agreement with American General which guaranteed their contract value for another three years while maintaining the interest rate of 4.75 percent until June 2018, Davis failed to act in the best interest of the investors.”
The complaint states further that Mr. Davis had the investors sign paperwork provided by the new product’s provider which were “subsequently rejected… because the forms supplied by Davis were outdated.” Still, it states, the investors “continued to trust Davis and signed the updated forms,” and submitted the forms, ultimately receiving a letter confirming their exchange contract. However, according to that complaint, the letter also notified them “that they were to be charged a surrender penalty in the amount of $15,648.88 for not submitting the paper within the allotted penalty-free withdrawal period.” Additionally, according to the complaint, Mr. Davis received a sales commission of about 3%, or $17,498.97. The complaint alleges that his recommendation was unsuitable and constituted a breach of his fiduciary duty because if the investors had kept their original annuity, they would have earned interest of about $86,361.10, whereas the new one earned about $43,013.54, or $43.347.53 than what they stood to earn in the original. “Despite multiple notices and letters from American General regarding the unsuitability of the Delaware Life product,” the complaint states, “Davis proceeded to place Investors One and Two in a product which generated substantially less interest… As a result, Davis failed to act in the best interest of his clients.”
As such, the complaint says, Royal Alliance Associates failed in its duty to supervise Mr. Davis while he gave unsuitable advice and breached his fiduciary duty to the couple, “and continued in their failure to supervise after they denied responsibility for Davis’s actions when the couple complained.” The Division is seeking an administrative fine, censure, and disgorgement from Royal Alliance and Mr. Davis in the pending complaint.