Royal Bank of Canada (RBC) has agreed to pay a $6m penalty to resolve the Securities and Exchange Commission (SEC) charges related to internal accounting controls violations.
According to the SEC, RBC violated the internal accounting controls and books and records provisions of the Securities Exchange Act of 1934.
The US securities watchdog found that between 2008 and 2020, the Canadian lender failed to accurately account for the costs of its internally developed software project.
The bank, for a part of its internally developed software projects, applied a single rate to determine the extent of cost capitalisation of the project.
It has failed to employ a reliable method for determining the applicable rate, to distinguish between capitalisable and noncapitalisable costs.
By using the same capitalisation rate each year without a proper basis, RBC capitalised on certain costs that were not eligible under the appropriate accounting methodology.
The Canadian lender, without admitting or denying the SEC findings, has agreed to cease and desist from committing or causing any violations or any future violations of these provisions.
SEC considered the bank’s remedial measures to accept the settlement.
The SEC investigation was conducted by Norman Ostrove, under the supervision of Julia Green, Scott Thompson, and Grippo, from the Philadelphia Regional Office.
The SEC personnel were assisted by the Ontario Securities Commission (OSC) and Quebec’s Autorité des Marchés Financiers (AMF).
SEC Philadelphia Regional Office regional director Nicholas Grippo said: “Royal Bank of Canada had longstanding internal accounting control deficiencies that it failed to adequately address.
“Properly functioning internal accounting controls are a front-line defence and help ensure accurate financial disclosures, the backbone of our capital markets.”
In September this year, RBC secured the Canadian Competition Bureau’s approval for its C$13.5bn ($10bn) acquisition of HSBC’s banking business in Canada (HSBC Canada).
The Canadian competition watchdog said that the acquisition is not expected to contribute to a significant reduction or prevention of competition.
