The SEC last week settled enforcement action against RBC for false and misleading statements in a fairness presentation regarding the sale of a public company.

RBC was the sell-side financial adviser to a listed company in connection with its sale to Warburg Pincus. RBC’s fairness presentation to the company’s Board incorrectly described company EBITDA figures as analyst “consensus projections.” This lowered the company’s valuation, because in fact analysts would have at least added back $6.3 million of one-time expenses. In related shareholder litigation, the Court of Chancery found that “RBC knew that the Board was uninformed … but failed to disclose the relevant information to further its own opportunity to close a deal, get paid its contingent fee, and receive additional and far greater fees for buy-side financing work.” As the court observed, “On Saturday morning, the ‘consensus’ precedent transaction range was $13.31 to $19.15. On Saturday afternoon, it was $8.19 to $16.71, entirely below the deal price.” The final offer made by Warburg Pincus was $17.25.

RBC’s figures were subsequently used in the company’s proxy statement. Consequently, RBC was found to have caused the company’s violation of Exchange Act rule 14a-9, the general antifraud rule for proxies.