Home > SEC sanctions Royal Alliance Associates, Inc.

SEC sanctions Royal Alliance Associates, Inc.

May 5, 2009

The SEC sanctioned brokerage firm Royal Alliance Associates, Inc.
based on alleged supervision deficiencies in connection with the firm's
supervision of former broker David McMillan.  McMillan, the SEC states,
operated a ponzi scheme that defrauded 28 or so investors out of more than
$3 Million.  In agreeing to a settlement of this matter, Royal Alliance was
censured, ordered to pay disgorgement of $1, and ordered to pay a civil
penalty of $500,000.  Royal Alliance is an "independent model" type of
firm.  In this model, many brokers operate their own offices, instead of at
a larger branch office of the firm, but are still subject to supervision by
the brokerage firm.

In the release from the
SEC<http://www.sec.gov/litigation/admin/2009/34-59830.pdf>,
the SEC essentially asserts that the firm failed to supervise in a few
particular ways:  1) failure to establish procedures for review of
operational bank records of satellite offices, 2) failure to have reasonable
systems in place to implement procedures for conducting exams of satellite
offices and didn't complete all of the exams and review findings, and 3)
failure to respond to red flags, such as investigating how a broker was
funding the operation of his satellite office when his commissions were
declining.  According to the SEC, these deficiencies could have led to the
detection of the broker's fraudulent conduct.