OSC seeks approval of settlement with RBC for alleged books and records failures

For Immediate Release OSC Enforcement

TORONTO – The Ontario Securities Commission (OSC) today filed a Statement of Allegations against Royal Bank of Canada (RBC) for failing to properly record the costs associated with internally developed software projects. A public hearing before the Capital Markets Tribunal will occur on November 3, 2023 at 8:00 AM to approve a settlement agreement regarding the allegations.

“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 alleges that, from 2008 through 2020, RBC’s books and records and internal accounting controls and processes were deficient. It is alleged that RBC incorrectly recorded certain costs related to internally developed software projects as intangible assets when they should have been expensed. The OSC further alleges that RBC lacked the necessary controls and procedures to effectively identify and report impaired assets associated with the development of this software.

The OSC does not allege, and has found no evidence of, dishonest or abusive conduct by RBC. Additionally, the investigation did not uncover evidence of harm or loss to investors, and there was no material impact on RBC’s financial statements. RBC has taken corrective actions designed to address the deficiencies and prevent the re-occurrence of similar events in the future.

The OSC acknowledges the assistance of the Autorité des marchés financiers and the U.S. Securities and Exchange Commission, both of which announced related settlements today.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair, efficient and competitive capital markets and confidence in the capital markets, to foster capital formation, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.ca.

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