AMF, SEC settlements already agreed, OSC Capital Markets Tribunal meets Friday
RBC has agreed settlements with two regulators over alleged accounting failures and is expected to agree another this morning (Nov. 3).
The Ontario Securities Commission says that RBC did not properly disclose the costs associated with internally developed software projects.
In a Statement of Allegations filed Thursday, the regulator alleges that the bank’s books and records and internal accounting controls were “deficient” and recorded the costs of software development as intangible assets instead of expenses. It says that the bank did not have the controls to identify and report impaired assets associated with the software.
“For an extended time, RBC recorded the costs of its internally developed software projects in a manner that was inconsistent with applicable accounting standards and contrary to Ontario securities law,” said Jeff Kehoe, Director of Enforcement at the OSC. “The books and records requirements are a critical component of our compliance and enforcement work, and longstanding failures such as these undermine investor confidence in Ontario’s capital markets.”
The OSC says that there is no allegation or evidence of dishonest or abusive conduct by RBC and there does not appear to be any harm or loss to investors or material impact on the banking group’s financial statements.
A public hearing of the OSC’s Capital Markets Tribunal takes place Friday November 3, 2023, at 8am ET to approve a settlement agreement.
AMF, SEC settlements
The AMF and SEC have reported related settlements.
The SEC said that “without admitting or denying the findings, Royal Bank of Canada has agreed to cease and desist from committing or causing any violations or any future violations of these provisions. Royal Bank of Canada also agreed to pay a $6 million civil penalty, offset by amounts paid to Canadian regulatory authorities as a result of the same conduct.”
“Royal Bank of Canada had longstanding internal accounting control deficiencies that it failed to adequately address,” said Nicholas P. Grippo, Regional Director of the Philadelphia Regional Office. “Properly functioning internal accounting controls are a front-line defense and help ensure accurate financial disclosures—the backbone of our capital markets.”
RBC will make a voluntary payment in the amount of $2,000,000 pursuant to the agreement reached with the AMF.
RBC neither admits nor denies the accuracy of the facts or conclusions set out in any of the agreements reached with the AMF and the OSC.
In a statement provided to Wealth Professional, an RBC spokesperson said:
“We are pleased to have resolved this matter, which relates to the capitalization rate applied to our internally developed software costs. While it was not material to our financial statements, we thoroughly investigated and took action to remediate our processes. We hold ourselves to the highest standards when it comes our financial governance and controls to ensure that we meet or exceed our regulators’ expectations and the expectations we have for ourselves.”
This story was updated on November 3, 2023, at 12.15pm ET to include the response from RBC.
