RBC Wealth Management (RBC WM) entered into a settlement with the Securities and Exchange Commission (SEC) without admitting to or denying the findings from the SEC’s Share Class Selection and Disclosure initiative. As a result, on March 11, 2019, the SEC entered an Order Instituting Administrative and Cease-and-Desist proceedings, Making findings, and Imposing Remedial Sanctions and a Cease-and-Desist order pertaining to RBC WM.
The settlement stems from RBC WM’s voluntary participation in the SEC’s initiative, and relates to the adequacy of RBC WM’s disclosure of receipt of 12b-1 fees* and selection of share classes that paid those fees. Under the settlement, RBC WM agreed to (a) cease and desist from committing or causing violations and any future violations of Sections 206(2) and 207 of the Investment Advisers Act of 1940; (b) a censure; (c) pay disgorgement and prejudgment interest to affected investors totaling $11,715,395.
The settlement does not include any penalty in recognition of RBC WM’s voluntarily participation in the SEC’s initiative. In addition, the settlement recognizes that RBC WM had already evaluated and moved existing clients to a lower-cost share class where necessary, and had also begun automatic conversions to lower-cost share classes beginning in March 2017. RBC WM also has a longstanding practice of rebating 12b-1 fees in retirement accounts and, more recently, in non-retirement accounts.
As part of the settlement, we are providing this communication as one of the methods for notifying affected investors. Additional information regarding the settlement is available in the most recent update to RBC WM’s Form ADV.
*12b-1 fees are marketing and distribution fees on mutual funds, considered part of a mutual fund’s operational expenses.