In re Jaime L. Durando
summary
Jaime L. Durando, former Head of RBC Capital Markets’ syndicate desk, violated securities laws by allocating new-issue municipal bonds to unregistered flippers over eligible retail and institutional customers between 2014 and 2017, resulting in a cease-and-desist order, censure, and a $25,000 civil penalty.
paragraph
Between January 2014 and December 2017, Jaime L. Durando, as Head of RBC’s syndicate desk, systematically allocated new-issue municipal bonds to unregistered flipper firms—RMR and CPM—instead of eligible retail and institutional customers, violating RBC’s internal policy and issuer directives. In one 2015 $626.8 million offering, he approved $1.75 million in allocations to flippers who falsely certified as retail investors despite lacking issuer eligibility, displacing legitimate orders and failing to document deviations. Durando was found to have willfully violated Section 15B(c)(1) of the Exchange Act and MSRB Rules G-11(k) and G-17, and consented to a cease-and-desist order, a censure, and a $25,000 civil penalty split between the MSRB and U.S. Treasury.
narrative
Jaime L. Durando, who served as Head of RBC Capital Markets’ syndicate desk from 2009 to at least 2017, violated federal securities laws and MSRB rules by repeatedly allocating new-issue municipal bonds to unregistered flipper firms—RMR Asset Management and Core Performance Management—over eligible retail and institutional customers between January 2014 and December 2017. Despite RBC’s internal policy requiring priority for customer orders and issuer-specific rules mandating retail eligibility, Durando approved allocations to flippers who falsely certified as retail investors, including in a $626.8 million offering in 2015 where $1.75 million in bonds were diverted to ineligible parties. He was aware that these flippers did not meet issuer criteria but still participated in their allocation, undermining the integrity of the municipal bond distribution process. Durando also failed to document these deviations from standard methodology, constituting deceptive and unfair practices under MSRB Rule G-17. The SEC found that his conduct violated Section 15B(c)(1) of the Exchange Act and MSRB Rules G-11(k) and G-17. Without admitting or denying the findings, Durando consented to a cease-and-desist order, a formal censure, and a $25,000 civil penalty—$8,333.33 paid to the MSRB and $16,666.67 to the U.S. Treasury. He was also barred from seeking penalty offsets or discharging the debt in bankruptcy as part of the remedial sanctions.
Classified broker-dealer-fraud(confidence 95%). EDGAR detection: forms Form D· recall 29% / precision 9%. detection rule →
Statutes
31 U.S.C. § 371711 U.S.C. §52311 U.S.C. §523(a)SECTIONS 15(b), 15B(c) AND 21C OF THE SECURITIES EXCHANGE ACTSECTIONS 15(b), 15B(c) AND 21C OF THE SECURITIES EXCHANGE ACTSECTIONS 15(b), 15B(c) AND 21C OF THE SECURITIES EXCHANGE ACT
Parties
Securities and Exchange CommissionRMR ASSET MANAGEMENT COMPANY
Keywords
ordersorderbondssyndicatedurandorbcretailsyndicate desksecuritiescommissionmunicipalexchangerespondentstandard methodologyissuer
Extracted insights
Dollar amounts 7
- $626.80M $626.8 million $100M–$1B
- $1.00M $1,000,000 $1M–$10M
- $500K $500,000 $100K–$1M
- $250K $250,000 $100K–$1M
- $25K $25,000 $10K–$100K
- $17K $16,666 $10K–$100K
- $8K $8,333 <$10K
Entities 4
- person jaime l. durando
- company rbc capital markets, llc
- agency sec as a broker-dealer
- agency Securities and Exchange Commission
Triples 9
- Jaime L. Durando violated Section 15B(c)(1) of the Exchange Act and MSRB Rules G-11(k) and G-17
- Jaime L. Durando served as Head of RBC's syndicate desk between January 2014 and December 2017
- Jaime L. Durando did not allocate bonds in accordance with standard methodology
- Jaime L. Durando participated in decision to allocate bonds to flippers who did not meet issuer's retail eligibility criteria
- RBC Capital Markets, LLC allocated bonds to unregistered brokers known as flippers
- RBC Capital Markets, LLC is registered with SEC as a broker-dealer
- SEC instituted administrative and cease-and-desist proceedings against Jaime L. Durando
- Jaime L. Durando joined RBC as registered representative in 2006
- RBC's syndicate desk allocated bonds to flippers ahead of institutional customer and dealer orders
PDF
Text layers
Extracted body text (20,025c)
Warning: TT: undefined function: 32
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 93044 / September 17, 2021
ADMINISTRATIVE PROCEEDING
File No. 3-20570
In the Matter of
Jaime L. Durando,
Respondent.
ORDER INSTITUTING
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTIONS 15(b), 15B(c) AND 21C OF
THE SECURITIES EXCHANGE ACT OF
1934 MAKING FINDINGS, AND
IMPOSING REMEDIAL SANCTIONS
AND A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the
public interest that public administrative and cease-and-desist proceedings be, and hereby are,
instituted pursuant to Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934
(“Exchange Act”) against Jaime L. Durando (“Durando” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission’s jurisdiction over him and the subject matter of these
proceedings, which are admitted, and except as provided herein in Section V, Respondent consents
to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to
Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934 and Making Findings, and
Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds
1
that:
Summary
This matter involves improper conduct by Durando in connection with the allocation and
sale of new issue bonds by RBC Capital Markets, LLC (“RBC”) to unregistered brokers known as
“flippers.” Between January 2014 and December 2017 (the “relevant period”), Durando served as
Head of RBC’s syndicate desk.
During the relevant period, RBC’s internal policy for primary offerings required the firm’s
syndicate desk, when acting as sole underwriter or senior syndicate manager, to allocate bonds
according to a “standard methodology” that prioritized customer and dealer orders over orders for
flippers absent different instructions from issuers. However, the syndicate desk did not always
follow the standard methodology, instead sometimes allocating some bonds to flippers ahead and
instead of institutional customer and dealer orders when orders exceeded the bonds available. In
connection with one offering where the issuer directed a retail order period, the syndicate desk also
allocated some bonds to two flippers ahead and instead of retail customers although the flippers did
not meet the issuer’s retail eligibility criteria.
Durando, on more than one occasion, did not allocate bonds in accordance with the standard
methodology. He also participated in the decision to allocate bonds to one of the flippers in the
offering where they placed retail orders with RBC although he knew that the flipper did not meet
the issuer’s retail eligibility criteria.
As a result of this conduct, Durando violated Section 15B(c)(1) of the Exchange Act and
Municipal Securities Rulemaking Board (“MSRB”) Rules G-11(k) and G-17.
Respondent
1. Jaime L. Durando, age 62, resides in Short Hills, New Jersey. Durando joined
RBC as a registered representative in 2006 and, since 2009, he has served as Head of the firm’s
syndicate desk in the municipal Sales, Trading and Syndication group (the “Municipal Group”).
Relevant Entities
2. RBC Capital Markets, LLC, incorporated in Minnesota with a principal place of
business in New York, New York, is registered with the Commission as a broker-dealer,
municipal securities dealer, investment adviser and municipal advisor.
3. RMR Asset Management Company (“RMR”), was a California corporation
with a principal place of business in Chula Vista, California. RMR primarily bought and sold
1
The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other
person or entity in this or any other proceeding.
new issue bonds. RMR was not registered with the Commission. The Commission filed an
enforcement action against RMR and its associates in August 2018.
2
4. Core Performance Management, LLC (“CPM”) was a Florida limited liability
company located in Boca Raton, Florida that was dissolved on July 27, 2016. During the
relevant period, CPM primarily bought and sold new issue municipal bonds. CPM was not
registered with the Commission. The Commission filed an enforcement action against CPM and
its associates in August 2018.
3
Background on Municipal Underwriting Process
5. Municipalities often raise money by issuing bonds that are sold to the public
through an underwriting process. In what is known as a “negotiated” offering, the municipal
issuer chooses a broker-dealer to act either as sole underwriter or as the senior manager of an
underwriting syndicate. An underwriting syndicate is a group of broker-dealers that join together
to purchase new issue bonds from the issuer to distribute the bonds to the public.
6. Negotiated offerings of new issue municipal bonds are conducted according to
certain rules, including the “priority of orders,” which establishes the sequence in which bonds
will be allocated to specific types of orders. Issuer priority rules typically assign retail customer
orders the highest priority in the bond allocation process. Issuers generally prioritize customer
orders ahead of orders for broker-dealers seeking bonds for their own inventory, and as a result
such orders are often not filled.
RBC’s Standard Methodology for Allocating Bonds in Primary Offerings
7. During the relevant period, RBC had a written internal policy (the “Policy”)
relating to new issue municipal bond offerings. The Policy established procedures that RBC’s
syndicate desk was to follow when RBC was acting as sole underwriter or senior syndicate
manager. In the absence of different priority instructions from issuers, flippers were to receive
the lowest priority. Specifically, the Policy required RBC’s syndicate desk to adhere to a
“standard methodology,” and prioritize orders and allocate bonds as follows:
● 1
st
priority: Orders for Customers
2
SEC v. RMR Asset Management Company, et al., 18-CV-01895-AJB-JMA (S.D. Cal. filed Aug. 14, 2018)
(partially settled action against RMR and 13 associated individuals for acting as unregistered brokers and, as to 10 of
them, for engaging in fraudulent practices in connection with flipping new issue municipal bonds). In August 2020,
the U.S. District Court for the Southern District of California granted summary judgment to the SEC, finding that
the three non-settling RMR associates acted as unregistered brokers in violation of Section 15(a) of the Exchange
Act when they engaged in thousands of securities transactions for RMR.
3
SEC v. Core Performance Management, LLC, et al., 18-CV-81081-BB (S.D. Fla., filed Aug. 14, 2018) (settled
action against CPM and five associated individuals for acting as unregistered brokers and for engaging in fraudulent
practices in connection with flipping new issue municipal bonds).
● 2
nd
priority: Orders for [RBC’s] own account, [RBC] related accounts or [RBC]
affiliated accounts (or syndicate member’s own, related or affiliated accounts, if
applicable)
● 3
rd
priority: Orders for Broker-Dealers other than [RBC] and syndicate members
● 4
th
priority: Any other orders
8. The Policy defined “Customer” orders entitled to first priority under the standard
methodology to “generally include all orders received by or on behalf of an individual or
institution other than 2
nd
, 3
rd
and 4
th
priority.” Orders that had last, or fourth, priority were
defined as “[any] other orders, including orders such as those submitted by a customer who, in
the reasonable belief of [RBC] plans to purchase the securities and immediately resell such
securities at higher prices (known as a “flipper”) or instances in which [RBC] is unable to
reasonably authenticate the status or qualification of an order during a retail order period directed
by an Issuer.”
9. Pursuant to the Policy, in advance of each negotiated offering where RBC’s
syndicate desk acted as sole underwriter or senior syndicate manager, RBC provided issuers a
written notice titled “Notice of Priority of Orders from and Allocations to Investors” (the
“Notices”). The Notices described the standard methodology, and they stated that RBC would
“deviate from such priority only when deemed by [RBC] to be in the best interests of the
syndicate or unless the Issuer otherwise consents.”
10. The Policy further required RBC’s syndicate desk to document any and all
deviations from established priority provisions, as well as the reasons for the deviations, and to
keep that documentation and any issuer instructions in the firm’s underwriting files.
Durando Participated in the Improper
Allocation and Sale of New Issue Bonds to Flippers
11. During the relevant period, when serving as sole underwriter or senior syndicate
manager, RBC’s underwriters on the syndicate desk did not always adhere to the standard
methodology set forth in the Policy and the Notices in the absence of different priority
instructions from issuers. Instead, on some occasions when orders exceeded the new issue bonds
available, underwriters on the syndicate desk prioritized orders for flippers over institutional
customer and dealer orders. As a result, the flippers’ orders “crowded out” institutional and
dealer orders that should have been filled first. Further, the syndicate desk failed to document
these deviations from the standard methodology or the reasons for them. Durando, on more than
one occasion, did not allocate bonds in accordance with the standard methodology and allocated
some bonds to orders for flippers ahead of higher priority institutional customer and dealer orders.
12. In one offering during the relevant period, the syndicate desk also allocated bonds
to flippers ahead and instead of retail customers although the flippers did not meet the issuer’s
retail eligibility criteria. In November 2015, RBC acted as senior syndicate manager for a
negotiated offering of municipal bonds in the total principal amount of $626.8 million. The
issuer directed that a retail order period be held in which first priority was to be given to retail
customer orders. Shortly before the retail order period closed, a RBC salesperson assigned to
cover the flippers submitted two orders for RMR and a third order for a CPM affiliate to the
syndicate desk. The salesperson falsely certified that the orders met the issuer’s retail eligibility
criteria, and affirmed their eligibility by providing zip codes that were not associated with the
flippers’ locations. Durando was the senior underwriter for the offering, and he and the Head of
the Municipal Group decided which orders to allocate bonds. Although Durando and the Head
of the Municipal Group knew that flippers were not retail customers and that they did not meet
the issuer’s retail eligibility criteria, they allocated $500,000 in bonds of one maturity to RMR
and $1,000,000 and $250,000 in bonds of another maturity to RMR and the CPM affiliate,
respectively. As a result, retail orders from other buyers for these maturities were not filled.
Legal Discussion
Durando Violated MSRB Rule G-17
13. MSRB Rule G-17 provides that, in the conduct of its municipal securities
business, every broker, dealer, municipal securities dealer, and municipal advisor shall deal fairly
with all persons and shall not engage in any deceptive, dishonest, or unfair practice. Negligence
is sufficient to establish a violation of MSRB Rule G-17; no finding of scienter is required. See
Wheat, First Securities, Inc., Exch. Act Release No. 48378, 2003 WL 21990950, at *10 (Aug.
20, 2003).
14. As discussed above, on more than one occasion, Durando did not allocate bonds
in accordance with the standard methodology. Additionally, in one offering where RBC had
received issuer priority instructions, Durando participated in the decision to allocate some bonds to
retail orders for one flipper ahead and instead of other retail orders when he knew that the flipper
did not meet the issuer’s retail eligibility criteria for the offering.
15. By this conduct, Durando willfully
4
violated MSRB Rule G-17.
Durando Violated MSRB Rule G-11(k)
16. MSRB Rule G-11(k) provides that each broker, dealer, or municipal
securities dealer that submits an order during a retail order period to the senior syndicate
manager or sole underwriter, as applicable, shall provide in writing the following information
relating to each order designated as retail submitted during a retail order period: (i) whether
the order is from a customer that meets the issuer’s eligibility criteria for participation in the
retail order period; (ii) whether the order is one for which a customer is already conditionally
committed; (iii) whether the broker, dealer, or municipal securities dealer has received more
than one order from such retail customer for a security for which the same CUSIP number has
been assigned; (iv) any identifying information required by the issuer, or the senior syndicate
manager on the issuer’s behalf, in connection with such retail order (but not including
4
“Willfully,” for purposes of imposing relief under Sections 15(b) and 15B of the Exchange Act “means no more
than that the person charged with the duty knows what he is doing.” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir.
2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)).
customer names or social security numbers); and (v) the par amount of the order.
5
17. As discussed above, in connection with a November 2015 offering, Durando
participated in the decision to allocate some bonds to fill “retail” orders for one flipper that
were submitted to RBC’s syndicate desk, which was serving as senior syndicate manager,
during the retail order period. Durando knew that the flipper did not meet the issuer’s retail
eligibility criteria, but nonetheless authorized the allocation of bonds to the flipper as retail.
18. By this conduct, Durando willfully violated MSRB Rule G-11(k).
Durando Violated Section 15B(c)(1) of the Exchange Act
19. Section 15B(c)(1) of the Exchange Act prohibits a broker, dealer or municipal
securities dealer from effecting interstate transactions in, or inducing or attempting to induce the
purchase or sale of, any municipal security in contravention of any rule of the MSRB.
20. As a result of the negligent conduct described above and his willful violations of
MSRB Rules G-11(k) and G-17, Durando willfully violated Section 15B(c)(1) of the Exchange
Act.
IV.
On the basis of the foregoing, the Commission deems it appropriate, in the public interest,
to impose the sanctions agreed to in Respondent’s Offer.
Accordingly, pursuant to Sections 15(b), 15B(c), and 21C of the Exchange Act, it is
hereby ORDERED that:
A. Durando cease and desist from committing or causing any violations and any
future violations of Section 15B(c)(1) of the Exchange Act.
B. Durando is censured.
C. Durando shall, within 10 days of the entry of this Order, pay a civil money
penalty in the amount of $25,000.00 to the Securities and Exchange Commission, of which a
total of $8,333.33 shall be transferred to the MSRB in accordance with Section 15B(c)(9)(A)
of the Exchange Act, and of which the remaining $16,666.67 shall be transferred to the
general fund of the United States Treasury in accordance with Section 21F(g)(3) of the
Exchange Act. If timely payment is not made, additional interest shall accrue pursuant to 31
U.S.C. § 3717.
D. Payments must be made in one of the following ways:
5
Rule G-11(k) further provides that the senior syndicate manager may rely on the information furnished by each
broker, dealer, or municipal securities dealer that provided the information required by (i) - (v) unless the senior
syndicate manager knows, or has reason to know, that the information is not true, accurate, or complete.
(1) Respondent may transmit payments electronically to the Commission,
which will provide detailed ACH transfer/Fedwire instructions upon
request;
(2) Respondent may make direct payment from a bank account via
Pay.gov through the SEC website at
http://www.sec.gov/about/offices/ofm.htm; or
(3) Respondent may pay by certified check, bank cashier’s check, or United
States postal money order, made payable to the Securities and Exchange
Commission and hand-delivered or mailed to:
Enterprise Services Center Accounts Receivable Branch HQ Bldg.,
Room 181, AMZ-341 6500 South MacArthur Boulevard, Oklahoma
City, OK 73169
Payments by check or money order must be accompanied by a cover letter
identifying RBC as a Respondent in these proceedings and the file number of these
proceedings; a copy of the cover letter and check or money order must be sent to Assistant
Regional Director Kevin B. Currid, Division of Enforcement, Securities and Exchange
Commission, 33 Arch Street, 24
th
Floor, Boston, MA 02110.
E. Amounts ordered to be paid as civil money penalties pursuant to this Order shall
be treated as penalties paid to the government for all purposes, including all tax purposes. To
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor
Action, Respondent shall not argue that it is entitled to, nor shall Respondent benefit by, offset or
reduction of any award of compensatory damages by the amount of any part of Respondent’s
payment of a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor
Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a
final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the
amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall
not be deemed an additional civil penalty and shall not be deemed to change the amount of the
civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor
Action” means a private damages action brought against Respondent by or on behalf of one or
more investors based on substantially the same facts as alleged in the Order instituted by the
Commission in this proceeding.
V.
It is further Ordered that, solely for purposes of exceptions to discharge set forth in
Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and
admitted by Respondent, and further, any debt for disgorgement, prejudgment interest, civil
penalty or other amounts due by Respondent under this Order or any other judgment, order,
consent order, decree or settlement agreement entered in connection with this proceeding, is a
debt for the violation by Respondent of the federal securities laws or any regulation or order
issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C.
§523(a)(19).
By the Commission.
Vanessa A. Countryman
Secretary OCR text (20,329c · tika · 95% conf)
UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Release No. 93044 / September 17, 2021
ADMINISTRATIVE PROCEEDING
File No. 3-20570
In the Matter of
Jaime L. Durando,
Respondent.
ORDER INSTITUTING
ADMINISTRATIVE AND CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO
SECTIONS 15(b), 15B(c) AND 21C OF
THE SECURITIES EXCHANGE ACT OF
1934 MAKING FINDINGS, AND
IMPOSING REMEDIAL SANCTIONS
AND A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the
public interest that public administrative and cease-and-desist proceedings be, and hereby are,
instituted pursuant to Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934
(“Exchange Act”) against Jaime L. Durando (“Durando” or “Respondent”).
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the
purpose of these proceedings and any other proceedings brought by or on behalf of the
Commission, or to which the Commission is a party, and without admitting or denying the findings
herein, except as to the Commission’s jurisdiction over him and the subject matter of these
proceedings, which are admitted, and except as provided herein in Section V, Respondent consents
to the entry of this Order Instituting Administrative and Cease-and-Desist Proceedings Pursuant to
Sections 15(b), 15B(c) and 21C of the Securities Exchange Act of 1934 and Making Findings, and
Imposing Remedial Sanctions and a Cease-and-Desist Order (“Order”), as set forth below.
III.
On the basis of this Order and Respondent’s Offer, the Commission finds1 that:
Summary
This matter involves improper conduct by Durando in connection with the allocation and
sale of new issue bonds by RBC Capital Markets, LLC (“RBC”) to unregistered brokers known as
“flippers.” Between January 2014 and December 2017 (the “relevant period”), Durando served as
Head of RBC’s syndicate desk.
During the relevant period, RBC’s internal policy for primary offerings required the firm’s
syndicate desk, when acting as sole underwriter or senior syndicate manager, to allocate bonds
according to a “standard methodology” that prioritized customer and dealer orders over orders for
flippers absent different instructions from issuers. However, the syndicate desk did not always
follow the standard methodology, instead sometimes allocating some bonds to flippers ahead and
instead of institutional customer and dealer orders when orders exceeded the bonds available. In
connection with one offering where the issuer directed a retail order period, the syndicate desk also
allocated some bonds to two flippers ahead and instead of retail customers although the flippers did
not meet the issuer’s retail eligibility criteria.
Durando, on more than one occasion, did not allocate bonds in accordance with the standard
methodology. He also participated in the decision to allocate bonds to one of the flippers in the
offering where they placed retail orders with RBC although he knew that the flipper did not meet
the issuer’s retail eligibility criteria.
As a result of this conduct, Durando violated Section 15B(c)(1) of the Exchange Act and
Municipal Securities Rulemaking Board (“MSRB”) Rules G-11(k) and G-17.
Respondent
1. Jaime L. Durando, age 62, resides in Short Hills, New Jersey. Durando joined
RBC as a registered representative in 2006 and, since 2009, he has served as Head of the firm’s
syndicate desk in the municipal Sales, Trading and Syndication group (the “Municipal Group”).
Relevant Entities
2. RBC Capital Markets, LLC, incorporated in Minnesota with a principal place of
business in New York, New York, is registered with the Commission as a broker-dealer,
municipal securities dealer, investment adviser and municipal advisor.
3. RMR Asset Management Company (“RMR”), was a California corporation
with a principal place of business in Chula Vista, California. RMR primarily bought and sold
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other
person or entity in this or any other proceeding.
new issue bonds. RMR was not registered with the Commission. The Commission filed an
enforcement action against RMR and its associates in August 2018.2
4. Core Performance Management, LLC (“CPM”) was a Florida limited liability
company located in Boca Raton, Florida that was dissolved on July 27, 2016. During the
relevant period, CPM primarily bought and sold new issue municipal bonds. CPM was not
registered with the Commission. The Commission filed an enforcement action against CPM and
its associates in August 2018.3
Background on Municipal Underwriting Process
5. Municipalities often raise money by issuing bonds that are sold to the public
through an underwriting process. In what is known as a “negotiated” offering, the municipal
issuer chooses a broker-dealer to act either as sole underwriter or as the senior manager of an
underwriting syndicate. An underwriting syndicate is a group of broker-dealers that join together
to purchase new issue bonds from the issuer to distribute the bonds to the public.
6. Negotiated offerings of new issue municipal bonds are conducted according to
certain rules, including the “priority of orders,” which establishes the sequence in which bonds
will be allocated to specific types of orders. Issuer priority rules typically assign retail customer
orders the highest priority in the bond allocation process. Issuers generally prioritize customer
orders ahead of orders for broker-dealers seeking bonds for their own inventory, and as a result
such orders are often not filled.
RBC’s Standard Methodology for Allocating Bonds in Primary Offerings
7. During the relevant period, RBC had a written internal policy (the “Policy”)
relating to new issue municipal bond offerings. The Policy established procedures that RBC’s
syndicate desk was to follow when RBC was acting as sole underwriter or senior syndicate
manager. In the absence of different priority instructions from issuers, flippers were to receive
the lowest priority. Specifically, the Policy required RBC’s syndicate desk to adhere to a
“standard methodology,” and prioritize orders and allocate bonds as follows:
● 1st priority: Orders for Customers
2 SEC v. RMR Asset Management Company, et al., 18-CV-01895-AJB-JMA (S.D. Cal. filed Aug. 14, 2018)
(partially settled action against RMR and 13 associated individuals for acting as unregistered brokers and, as to 10 of
them, for engaging in fraudulent practices in connection with flipping new issue municipal bonds). In August 2020,
the U.S. District Court for the Southern District of California granted summary judgment to the SEC, finding that
the three non-settling RMR associates acted as unregistered brokers in violation of Section 15(a) of the Exchange
Act when they engaged in thousands of securities transactions for RMR.
3 SEC v. Core Performance Management, LLC, et al., 18-CV-81081-BB (S.D. Fla., filed Aug. 14, 2018) (settled
action against CPM and five associated individuals for acting as unregistered brokers and for engaging in fraudulent
practices in connection with flipping new issue municipal bonds).
● 2nd priority: Orders for [RBC’s] own account, [RBC] related accounts or [RBC]
affiliated accounts (or syndicate member’s own, related or affiliated accounts, if
applicable)
● 3rd priority: Orders for Broker-Dealers other than [RBC] and syndicate members
● 4th priority: Any other orders
8. The Policy defined “Customer” orders entitled to first priority under the standard
methodology to “generally include all orders received by or on behalf of an individual or
institution other than 2nd, 3rd and 4th priority.” Orders that had last, or fourth, priority were
defined as “[any] other orders, including orders such as those submitted by a customer who, in
the reasonable belief of [RBC] plans to purchase the securities and immediately resell such
securities at higher prices (known as a “flipper”) or instances in which [RBC] is unable to
reasonably authenticate the status or qualification of an order during a retail order period directed
by an Issuer.”
9. Pursuant to the Policy, in advance of each negotiated offering where RBC’s
syndicate desk acted as sole underwriter or senior syndicate manager, RBC provided issuers a
written notice titled “Notice of Priority of Orders from and Allocations to Investors” (the
“Notices”). The Notices described the standard methodology, and they stated that RBC would
“deviate from such priority only when deemed by [RBC] to be in the best interests of the
syndicate or unless the Issuer otherwise consents.”
10. The Policy further required RBC’s syndicate desk to document any and all
deviations from established priority provisions, as well as the reasons for the deviations, and to
keep that documentation and any issuer instructions in the firm’s underwriting files.
Durando Participated in the Improper
Allocation and Sale of New Issue Bonds to Flippers
11. During the relevant period, when serving as sole underwriter or senior syndicate
manager, RBC’s underwriters on the syndicate desk did not always adhere to the standard
methodology set forth in the Policy and the Notices in the absence of different priority
instructions from issuers. Instead, on some occasions when orders exceeded the new issue bonds
available, underwriters on the syndicate desk prioritized orders for flippers over institutional
customer and dealer orders. As a result, the flippers’ orders “crowded out” institutional and
dealer orders that should have been filled first. Further, the syndicate desk failed to document
these deviations from the standard methodology or the reasons for them. Durando, on more than
one occasion, did not allocate bonds in accordance with the standard methodology and allocated
some bonds to orders for flippers ahead of higher priority institutional customer and dealer orders.
12. In one offering during the relevant period, the syndicate desk also allocated bonds
to flippers ahead and instead of retail customers although the flippers did not meet the issuer’s
retail eligibility criteria. In November 2015, RBC acted as senior syndicate manager for a
negotiated offering of municipal bonds in the total principal amount of $626.8 million. The
issuer directed that a retail order period be held in which first priority was to be given to retail
customer orders. Shortly before the retail order period closed, a RBC salesperson assigned to
cover the flippers submitted two orders for RMR and a third order for a CPM affiliate to the
syndicate desk. The salesperson falsely certified that the orders met the issuer’s retail eligibility
criteria, and affirmed their eligibility by providing zip codes that were not associated with the
flippers’ locations. Durando was the senior underwriter for the offering, and he and the Head of
the Municipal Group decided which orders to allocate bonds. Although Durando and the Head
of the Municipal Group knew that flippers were not retail customers and that they did not meet
the issuer’s retail eligibility criteria, they allocated $500,000 in bonds of one maturity to RMR
and $1,000,000 and $250,000 in bonds of another maturity to RMR and the CPM affiliate,
respectively. As a result, retail orders from other buyers for these maturities were not filled.
Legal Discussion
Durando Violated MSRB Rule G-17
13. MSRB Rule G-17 provides that, in the conduct of its municipal securities
business, every broker, dealer, municipal securities dealer, and municipal advisor shall deal fairly
with all persons and shall not engage in any deceptive, dishonest, or unfair practice. Negligence
is sufficient to establish a violation of MSRB Rule G-17; no finding of scienter is required. See
Wheat, First Securities, Inc., Exch. Act Release No. 48378, 2003 WL 21990950, at *10 (Aug.
20, 2003).
14. As discussed above, on more than one occasion, Durando did not allocate bonds
in accordance with the standard methodology. Additionally, in one offering where RBC had
received issuer priority instructions, Durando participated in the decision to allocate some bonds to
retail orders for one flipper ahead and instead of other retail orders when he knew that the flipper
did not meet the issuer’s retail eligibility criteria for the offering.
15. By this conduct, Durando willfully4 violated MSRB Rule G-17.
Durando Violated MSRB Rule G-11(k)
16. MSRB Rule G-11(k) provides that each broker, dealer, or municipal
securities dealer that submits an order during a retail order period to the senior syndicate
manager or sole underwriter, as applicable, shall provide in writing the following information
relating to each order designated as retail submitted during a retail order period: (i) whether
the order is from a customer that meets the issuer’s eligibility criteria for participation in the
retail order period; (ii) whether the order is one for which a customer is already conditionally
committed; (iii) whether the broker, dealer, or municipal securities dealer has received more
than one order from such retail customer for a security for which the same CUSIP number has
been assigned; (iv) any identifying information required by the issuer, or the senior syndicate
manager on the issuer’s behalf, in connection with such retail order (but not including
4 “Willfully,” for purposes of imposing relief under Sections 15(b) and 15B of the Exchange Act “means no more
than that the person charged with the duty knows what he is doing.” Wonsover v. SEC, 205 F.3d 408, 414 (D.C. Cir.
2000) (quoting Hughes v. SEC, 174 F.2d 969, 977 (D.C. Cir. 1949)).
customer names or social security numbers); and (v) the par amount of the order.5
17. As discussed above, in connection with a November 2015 offering, Durando
participated in the decision to allocate some bonds to fill “retail” orders for one flipper that
were submitted to RBC’s syndicate desk, which was serving as senior syndicate manager,
during the retail order period. Durando knew that the flipper did not meet the issuer’s retail
eligibility criteria, but nonetheless authorized the allocation of bonds to the flipper as retail.
18. By this conduct, Durando willfully violated MSRB Rule G-11(k).
Durando Violated Section 15B(c)(1) of the Exchange Act
19. Section 15B(c)(1) of the Exchange Act prohibits a broker, dealer or municipal
securities dealer from effecting interstate transactions in, or inducing or attempting to induce the
purchase or sale of, any municipal security in contravention of any rule of the MSRB.
20. As a result of the negligent conduct described above and his willful violations of
MSRB Rules G-11(k) and G-17, Durando willfully violated Section 15B(c)(1) of the Exchange
Act.
IV.
On the basis of the foregoing, the Commission deems it appropriate, in the public interest,
to impose the sanctions agreed to in Respondent’s Offer.
Accordingly, pursuant to Sections 15(b), 15B(c), and 21C of the Exchange Act, it is
hereby ORDERED that:
A. Durando cease and desist from committing or causing any violations and any
future violations of Section 15B(c)(1) of the Exchange Act.
B. Durando is censured.
C. Durando shall, within 10 days of the entry of this Order, pay a civil money
penalty in the amount of $25,000.00 to the Securities and Exchange Commission, of which a
total of $8,333.33 shall be transferred to the MSRB in accordance with Section 15B(c)(9)(A)
of the Exchange Act, and of which the remaining $16,666.67 shall be transferred to the
general fund of the United States Treasury in accordance with Section 21F(g)(3) of the
Exchange Act. If timely payment is not made, additional interest shall accrue pursuant to 31
U.S.C. § 3717.
D. Payments must be made in one of the following ways:
5 Rule G-11(k) further provides that the senior syndicate manager may rely on the information furnished by each
broker, dealer, or municipal securities dealer that provided the information required by (i) - (v) unless the senior
syndicate manager knows, or has reason to know, that the information is not true, accurate, or complete.
(1) Respondent may transmit payments electronically to the Commission,
which will provide detailed ACH transfer/Fedwire instructions upon
request;
(2) Respondent may make direct payment from a bank account via
Pay.gov through the SEC website at
http://www.sec.gov/about/offices/ofm.htm; or
(3) Respondent may pay by certified check, bank cashier’s check, or United
States postal money order, made payable to the Securities and Exchange
Commission and hand-delivered or mailed to:
Enterprise Services Center Accounts Receivable Branch HQ Bldg.,
Room 181, AMZ-341 6500 South MacArthur Boulevard, Oklahoma
City, OK 73169
Payments by check or money order must be accompanied by a cover letter
identifying RBC as a Respondent in these proceedings and the file number of these
proceedings; a copy of the cover letter and check or money order must be sent to Assistant
Regional Director Kevin B. Currid, Division of Enforcement, Securities and Exchange
Commission, 33 Arch Street, 24th Floor, Boston, MA 02110.
E. Amounts ordered to be paid as civil money penalties pursuant to this Order shall
be treated as penalties paid to the government for all purposes, including all tax purposes. To
preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor
Action, Respondent shall not argue that it is entitled to, nor shall Respondent benefit by, offset or
reduction of any award of compensatory damages by the amount of any part of Respondent’s
payment of a civil penalty in this action (“Penalty Offset”). If the court in any Related Investor
Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a
final order granting the Penalty Offset, notify the Commission’s counsel in this action and pay the
amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall
not be deemed an additional civil penalty and shall not be deemed to change the amount of the
civil penalty imposed in this proceeding. For purposes of this paragraph, a “Related Investor
Action” means a private damages action brought against Respondent by or on behalf of one or
more investors based on substantially the same facts as alleged in the Order instituted by the
Commission in this proceeding.
http://www.sec.gov/about/offices/ofm.htm
V.
It is further Ordered that, solely for purposes of exceptions to discharge set forth in
Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this Order are true and
admitted by Respondent, and further, any debt for disgorgement, prejudgment interest, civil
penalty or other amounts due by Respondent under this Order or any other judgment, order,
consent order, decree or settlement agreement entered in connection with this proceeding, is a
debt for the violation by Respondent of the federal securities laws or any regulation or order
issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code, 11 U.S.C.
§523(a)(19).
By the Commission.
Vanessa A. Countryman
Secretary