diff --git a/rcl/src/rcl/arguments.c b/rcl/src/rcl/arguments.c
index cf62670bb..da51d2661 100644
--- a/rcl/src/rcl/arguments.c
+++ b/rcl/src/rcl/arguments.c
@@ -610,21 +610,35 @@ rcl_parse_arguments(
 
       // Attempt to parse argument as parameter file rule
       args_impl->parameter_files[args_impl->num_param_files_args] = NULL;
-      if (
-        RCL_RET_OK == _rcl_parse_param_file_rule(
-          argv[i], allocator, args_impl->parameter_overrides,
-          &args_impl->parameter_files[args_impl->num_param_files_args]))
-      {
-        ++(args_impl->num_param_files_args);
+      ret = _rcl_parse_param_file_rule(
+        argv[i], allocator, args_impl->parameter_overrides,
+        &args_impl->parameter_files[args_impl->num_param_files_args]);
+
+      // Deprecation warning regardless if there is an error parsing the file
+      if (RCL_RET_INVALID_PARAM_RULE != ret) {
         RCUTILS_LOG_WARN_NAMED(ROS_PACKAGE_NAME,
           "Found parameter file rule '%s'. This syntax is deprecated. Use '%s %s %s' instead.",
           argv[i], RCL_ROS_ARGS_FLAG, RCL_PARAM_FILE_FLAG,
-          args_impl->parameter_files[args_impl->num_param_files_args - 1]);
+          args_impl->parameter_files[args_impl->num_param_files_args]);
+      }
+
+      if (RCL_RET_OK == ret) {
+        ++(args_impl->num_param_files_args);
         RCUTILS_LOG_DEBUG_NAMED(ROS_PACKAGE_NAME,
           "params rule : %s\n total num param rules %d",
           args_impl->parameter_files[args_impl->num_param_files_args - 1],
           args_impl->num_param_files_args);
         continue;
+      } else if (RCL_RET_ERROR == ret) {
+        // If _rcl_parse_param_file_rule() returned RCL_RET_ERROR then the argument contained the
+        // '__params:=' prefix, but parsing the parameter file failed.
+        rcl_error_string_t prev_error_string = rcl_get_error_string();
+        rcl_reset_error();
+        RCL_SET_ERROR_MSG_WITH_FORMAT_STRING(
+          "Couldn't parse params file: '%s'. Error: %s",
+          args_impl->parameter_files[args_impl->num_param_files_args],
+          prev_error_string.str);
+        goto fail;
       }
       RCUTILS_LOG_DEBUG_NAMED(ROS_PACKAGE_NAME,
         "Couldn't parse arg %d (%s) as a deprecated parameter file rule. Error: %s",
@@ -751,7 +765,7 @@ rcl_parse_arguments(
   }
 
   // Drop parameter overrides if none was found.
-  if (0U == args_impl->parameter_overrides->num_nodes) {
+  if (NULL != args_impl->parameter_overrides && 0U == args_impl->parameter_overrides->num_nodes) {
     rcl_yaml_node_struct_fini(args_impl->parameter_overrides);
     args_impl->parameter_overrides = NULL;
   }
diff --git a/rcl/test/rcl/test_arguments.cpp b/rcl/test/rcl/test_arguments.cpp
index 0f8964069..e8f4f072e 100644
--- a/rcl/test/rcl/test_arguments.cpp
+++ b/rcl/test/rcl/test_arguments.cpp
@@ -897,6 +897,26 @@ TEST_F(CLASSNAME(TestArgumentsFixture, RMW_IMPLEMENTATION), test_deprecated_para
   EXPECT_EQ(1, *(param_value->integer_value));
 }
 
+// Regression test for https://github.com/ros2/rcl/issues/553
+// Testing behaviour that was broken in Eloquent
+TEST_F(
+  CLASSNAME(TestArgumentsFixture, RMW_IMPLEMENTATION), test_deprecated_param_argument_malformed)
+{
+  const std::string parameters_filepath = (test_path / "test_malformed_parameters.1.yaml").string();
+  const std::string parameter_rule = "__params:=" + parameters_filepath;
+  const char * argv[] = {
+    "process_name", parameter_rule.c_str()
+  };
+  int argc = sizeof(argv) / sizeof(const char *);
+  rcl_ret_t ret;
+
+  rcl_allocator_t alloc = rcl_get_default_allocator();
+  rcl_arguments_t parsed_args = rcl_get_zero_initialized_arguments();
+
+  ret = rcl_parse_arguments(argc, argv, alloc, &parsed_args);
+  ASSERT_EQ(RCL_RET_ERROR, ret) << rcl_get_error_string().str;
+}
+
 TEST_F(CLASSNAME(TestArgumentsFixture, RMW_IMPLEMENTATION), test_param_argument_multiple) {
   const std::string parameters_filepath1 = (test_path / "test_parameters.1.yaml").string();
   const std::string parameters_filepath2 = (test_path / "test_parameters.2.yaml").string();
diff --git a/rcl/test/resources/test_arguments/test_malformed_parameters.1.yaml b/rcl/test/resources/test_arguments/test_malformed_parameters.1.yaml
new file mode 100644
index 000000000..257224a97
--- /dev/null
+++ b/rcl/test/resources/test_arguments/test_malformed_parameters.1.yaml
@@ -0,0 +1,5 @@
+some_node:
+  ros_parameters:
+    int_param: 1
+    param_group:
+      string_param: foo
diff --git a/rcl_yaml_param_parser/src/parser.c b/rcl_yaml_param_parser/src/parser.c
index 6c5abe890..4ab6f059a 100644
--- a/rcl_yaml_param_parser/src/parser.c
+++ b/rcl_yaml_param_parser/src/parser.c
@@ -1705,7 +1705,6 @@ bool rcl_parse_yaml_file(
     if (NULL != ns_tracker.parameter_ns) {
       allocator.deallocate(ns_tracker.parameter_ns, allocator.state);
     }
-    rcl_yaml_node_struct_fini(params_st);
     return false;
   }