Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Texas Attorney General settles municipal bond underwriting charges, (Oct 7, 2014)

By Greg Hammond, J.D.

The Attorney General for the State of Texas has entered into a settlement agreement with RBC Capital Markets, LLC, disposing of possible allegations that RBC engaged in anticompetitive acts involving underwriting fees paid by Houston municipal utility districts. According to the settlement, RBC will be required to pay $990,000 in restitution to 63 municipal utility districts.

RBC is an indirect subsidiary of the Royal Bank of Canada, and provides financial advisory and underwriting services to state and local government entities, including municipal utility districts. R. Craig Rathmann was an employee of RBC, between 1992 and 2003. However, upon his decision to leave RBC, Rathmann and RBC allegedly entered into a separation agreement, in which the two parties agreed not to compete against each other. In addition, Rathmann purportedly agreed to use RBC as lead underwriter for his clients, and to secure an underwriter’s discount of 1.25 percent of the gross proceeds from the sale of bonds. In return, RBC allegedly agreed not to solicit Rathmann’s financial advisory clients.

The Attorney General’s office had alleged that RBC and Rathmann unreasonably restrained competition by entering into the separation agreement, and that certain municipal utility districts were deprived of the benefits of competition. Consequently, RBC agreed to pay $990,000 in restitution to 63 municipal utility districts, and is further prohibited from entering into similar agreements in the future. The bank is also required to provide reasonable cooperation with the Attorney General’s ongoing investigation into the related proceedings and actions against Rathmann.

Companies: RBC Capital Markets, LLC

News: Antitrust