NEW YORK, Oct. 8 /CNW/ - Royal Bank of Canada (RY on TSX and NYSE) today
announced that, as part of a settlement with the United States Securities and
Exchange Commission, New York Attorney General's office, and the North
American Securities Administrators Association, it will offer to purchase, at
par, auction rate securities held by its U.S. retail brokerage clients,
defined as all individual investors, charities with accounts at RBC of
US$25 million or less, as well as small institutions and businesses with
accounts at RBC of US$10 million or less. The repurchase offer is being
extended to approximately 2,200 clients, in the wealth management and capital
markets divisions of RBC Capital Markets Corporation, as well as from JB
Hanauer & Co. and Ferris, Baker Watts, Inc., two firms recently acquired by
The specific elements of the settlement agreements are as follows:
- No later than December 15, 2008, and for a period of six months, RBC
will offer to purchase at par non-performing auction rate securities
from all individual investors, charities with accounts at RBC of US
$25 million or less, and small institutions and businesses with
accounts at RBC of US$10 million or less who purchased the securities
from or through RBC prior to February 11, 2008.
- The offer will apply to all auction rate securities for which
auctions are not operating at the time of the offer.
- Qualifying clients who sold eligible auction rate securities below
par between February 11, 2008 and the settlement date will be paid
the difference between par and the price of the sale.
Other Key Terms
- RBC will continue its program to extend to retail clients, at their
request, loans for the purposes of liquidity of up to the full par
amount of the investor's eligible auction rate securities, for the
period up to the commencement of RBC's repurchase offer, at no net
interest cost to the investor.
- RBC will continue to work with issuers and other interested parties
to provide liquidity solutions for institutional investors not
covered by the repurchase offer.
- RBC will participate in a special arbitration process overseen by the
Financial Industry Regulatory Authority (FINRA) through which any
retail client who purchased auction rate securities from RBC will be
able to make claims for consequential damages.
The repurchase offer represents approximately US$850 million of auction
rate securities, of which more than 85 per cent are AAA-rated. Of this dollar
amount, more than 70 per cent are auction rate preferred securities for which
other broker dealers were lead underwriters and auction agents.
The impact of the repurchase offer to RBC's fourth quarter 2008 results
is currently estimated to be approximately US$30 million on a pre-tax basis.
This is based on the estimated difference between par value and current
valuations and a penalty of US$9.8 million RBC has agreed to pay to the New
York Attorney General's office and the state securities commissioners
associated with the North American Securities Administrators Association. RBC
neither admits nor denies allegations of wrongdoing. The actual financial
impact to RBC of the repurchase offer will depend on the number of clients who
accept the repurchase offer, and market conditions at the time they accept.
Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate
under the master brand name of RBC. We are Canada's largest bank as measured
by assets and market capitalization and one of North America's leading
diversified financial services companies. We provide personal and commercial
banking, wealth management services, insurance, corporate and investment
banking and transaction processing services on a global basis. We employ
approximately 75,000 full- and part-time employees who serve more than
17 million personal, business, public sector and institutional clients through
offices in Canada, the U.S. and 46 other countries. For more information,
please visit www.rbc.com.
Caution regarding forward-looking statements
From time to time, we make written or oral forward-looking statements
within the meaning of certain securities laws, including the "safe harbor"
provisions of the United States Private Securities Litigation Reform Act of
1995 and any applicable Canadian securities legislation. These forward-looking
statements include, among others, statements with respect to the amount of
securities covered by RBC's repurchase offer and the financial impact to RBC.
Forward-looking statements are typically identified by words such as "expect,"
"estimate," believe and similar expressions of future or conditional verbs
such as "will," "may," "should" or "would". By their very nature,
forward-looking statements require us to make assumptions, and are subject to
inherent risks and uncertainties, which give rise to the possibility that our
estimates, projections, expectations or conclusions will not prove to be
accurate, that our assumptions may not be correct and that other forward
looking statements will not be achieved. We caution readers not to place undue
reliance on these statements as a number of important factors could cause our
actual results to differ materially from the expectations expressed in such
These factors include general business and economic conditions in Canada,
the United States, and other countries in which we conduct business, including
the impact from continuing volatility in the U.S. subprime and related markets
and lack of liquidity in various other financial markets; the impact of the
movement of the Canadian dollar relative to other currencies, particularly the
U.S. dollar, British pound and Euro; the effects of changes in government
monetary and other policies; the impact of changes in laws and regulations
including tax laws, changes in accounting standards, policies and estimates,
including changes in our estimates of provisions and allowances, and changes
to our credit ratings.
We caution that the foregoing list of important factors that may affect
future results is not exhaustive and other factors could also adversely affect
our results. Except as required by law, we do not undertake to update any
forward-looking statement, whether written or oral, that may be made from time
to time by us or on our behalf. Additional information about these and other
factors can be found in our Third Quarter 2008 Report to Shareholders and in
our 2007 Annual Report.
For further information:
For further information: Media contacts: Gillian Hewitt, RBC, (416)
974-0668; Beja Rodeck, RBC, Media Relations, (416) 974-5506; Investor contact:
Amy Cairncross, Investor Relations, (416) 955-7809