The college of the Autorité des marchés financiers (AMF) on Friday requested a warning and a fine of 500,000 euros against the bank RBC Investor Services Bank France (RBCBF) for “lack of diligence” in its monitoring of the management of funds of third.
This French entity of Royal Bank of Canada (RBC) offers a depository service to investors, in particular to undertakings for collective investment in transferable securities (UCITS) and alternative investment funds (AIF). It thus acts as an intermediary between these investors and other organisations, to implement and monitor the regularity of operations, such as asset swaps or loans.
The college of the AMF accuses it of a “lacunate exercise of its control as depositary of the rules of investment and composition of the activity of UCITS”, explained the representative of the college during the session of the Sanctions Committee.
It also criticizes the bank for a lack of monitoring of the cash flows of two AIFs managed by Nestadio Capital – a portfolio management company placed in compulsory liquidation at the end of 2021 -, monitoring which is the responsibility of RBCBF under its “due diligence obligations”.
The college criticizes RBC for not having gathered enough information from Nestadio during 2018, thus breaching its obligation to monitor the regularity of cash flows, and in particular the overruns of liquidity ratios.
The defense rejects these grievances, claiming to have respected its obligations.
“There was a confusion between the duties incumbent on the management company and the depositary,” retorted the lawyer for RBCBF. “We custodians are not interested in economic rationality. Our obligation was not to go and see whether or not the company was solvent,” he added.
But for the college, the monitoring obligation, which “in essence” requires the depositary to identify the legal and economic nature of the companies’ operations, “is common sense”, concluded the representative of the college.
The Sanctions Commission’s decision is expected in the coming weeks.
This is the third time that the Sanctions Commission has had to rule on the activity of depositary companies. In 2013, it condemned Société Générale to a fine of 500,000 euros to sanction shortcomings in the implementation of an audit procedure in its asset management activities.