The US Securities and Exchange Commission (SEC) has hit Royal Bank of Canada (RBC) with a $6 million fine for internal accounting control violations.

The regulator discovered the bank “failed to ensure” it accurately accounted for an internal software development project between 2008 and 2020.

“Royal Bank of Canada applied a single rate to determine how much of those projects’ costs to capitalise, but it lacked a reliable method for determining the appropriate rate to apply, in part because it could not adequately differentiate between capitalisable and noncapitalisable costs,” the SEC said.

Due to its actions, the SEC noted RBC was using the same capitalisation rate each year without a sufficient basis and capitalising certain costs that were ineligible under the appropriate accounting methodology.

“Royal Bank of Canada had longstanding internal accounting control deficiencies that it failed to adequately address,” said Nicholas P. Grippo, regional director at the SEC’s Philadelphia regional office. “Properly functioning internal accounting controls are a front-line defence and help ensure accurate financial disclosures – the backbone of our capital markets.”

Without admitting or denying the SEC findings, it is understood that RBC has agreed to cease and desist from committing or causing any violations or any future violations of these provisions and to pay the $6 million penalty.

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