By Tom Bradley

In the Report on Business on Monday, there was an article on a case playing out in the U.S. courts that involved RBC. It reinforces my previous comments with regard to the sliding standards of conduct that exist in the investment banking arena.

In this case, a Delaware court ruled that RBC Capital Markets misled investors when it was advising a special committee of the Board of Rural/Metro Corp. on the potential sale of the company. At the same time as RBC was acting as an independent advisor, it was also pitching the buyer, Warburg Pincus LLC, for a share of the debt financing (this is known as ‘staple’ financing, whereby the advisor to the seller provides financing to the buyer). The court held that RBC’s lobbying with Warburg compromised its advice to the board of Rural/Metro.

Investment banking has been going through a tough patch. Big deals are harder to come by and profits are down, both at investment dealers and law firms. But even before the current slowdown, investment banking was the wild west of the financial industry, with firms playing fast and loose when it comes to conflicts of interest.

There’s lots of discussion in the wealth management industry about fiduciary duty and standards of advice, but when dealing with newly-issued shares and investment products, and takeover offers, there’s no debate – you and your advisor need to carefully assess each situation and figure out what’s best for you. Be assured, you’re not on the list of people the investment bankers are looking out for.