Royal Bank of Canada unit settles U.S. SEC charges related to municipal bonds

BY Reuters | ECONOMIC | 09/17/21 09:15 AM EDT

Sept 17 (Reuters) - A unit of Royal Bank of Canada (RY) will pay more than $800,000 to resolve U.S. Securities and Exchange Commission charges it engaged in unfair dealing by failing to give priority to retail and institutional investors in municipal bond offerings.

The SEC said on Friday that over nearly four years, RBC Capital Markets LLC improperly allocated bonds to parties known as "flippers" who resold, or "flipped," their bonds to other broker-dealers at a profit.

RBC did not admit or deny wrongdoing in agreeing to settle.

(Reporting by Jonathan Stempel in New York Editing by Chizu Nomiyama)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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