By Maria Armental
Royal Bank of Canada was ordered by a federal court to pay $35
million in connection to hundreds of millions of dollars in illegal
futures trades to reap tax benefits.
Federal authorities charged Canada's largest bank engaged in
more than 1,000 so-called "wash sales" and fictitious sales over a
three-year period.
From 2007 to 2010, the U.S. Commodity Futures Trading Commission
said, officials at RBC coordinated with two subsidiaries to buy and
sell futures contracts so that RBC entities would be both the buyer
and seller. By trading the same quantity of the same futures
contracts at the same price and time, they "washed" the results
while locking in "lucrative" Canadian tax breaks on dividend
payments.
Wash trades, which evade the basic pricing mechanisms of
financial markets, can be used to generate a commission, improperly
boost trading volume or influence prices.
RBC was accused of routing the transactions through OneChicago,
an electronic futures-trading exchange in Chicago that is partly
owned by CME Group Inc.
A spokesman for RBC said the bank remains "committed to
complying with our regulators' requirements. The settlement is in
the best interests of our clients and shareholders, recognizing
that continued litigation is costly and uncertain."
Representatives from CME couldn't immediately be reached for
comment.
Write to Maria Armental at maria.armental@wsj.com
Access Investor Kit for Royal Bank of Canada
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=CA7800871021
Access Investor Kit for CME Group, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US12572Q1058
Access Investor Kit for Regal-Beloit Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US7587501039
Subscribe to WSJ: http://online.wsj.com?mod=djnwires