RBC to Pay Fine Over False Disclosure in Warburg Pincus Deal

  • Bank to pay $2.5 million to settle claims in Rural/Metro sale
  • U.S. regulator’s case follows successful shareholder suit

Royal Bank of Canada agreed to pay $2.5 million to settle U.S. Securities and Exchange Commission allegations that its valuation of an ambulance-provider in 2011 was too low, making a Warburg Pincus takeover offer look more attractive.

The bank’s RBC Capital Markets unit presented the board of Rural/Metro Corp. a fairness opinion that contained “materially false” representations of the company’s value and were not “consensus projections” from Wall Street analysts as the lender claimed, according to an SEC statement Wednesday. Toronto-based RBC, which didn’t admit or deny the SEC’s findings, received a $500,000 fee for its recommendation on the buyout.

“Accurate disclosures about financial advisers’ fairness opinions are important to shareholders in the sale of a corporation,” Andrew Ceresney, the SEC’s head of enforcement, said in a statement.

The SEC action comes almost two years after a Delaware judge ordered RBC to pay $75.7 million to Rural/Metro shareholders who alleged in a lawsuit that they were misled about the company’s value. The Delaware Court of Chancery found that the lender “aided and abetted” the board’s breach of fiduciary duty.

RBC’s fairness opinion was included in a May 2011 proxy submitted to Rural/Metro investors to solicit their approval of the Warburg Pincus acquisition, the SEC said.

“We are pleased to resolve this matter and put this behind us,” said Elisa Barsotti, a Royal Bank spokeswoman. Christopher Beattie declined to comment for Warburg Pincus.

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