The settlement agreement between the regulator and the firm states that Royal Mutual Funds’ clients would have the option to request CESG applications as part of the RESP account opening process, but this relied on staff checking a box when adding clients’ personal information to the firm’s back office system.
The CESG program, designed to encourage Canadians to save for their education as part of the Canada Education Savings Program, is administered by Employment and Social Development Canada which in September 2020 conducted a review of all registered promoters of CESG, including RBC which submitted applications on behalf of Royal Mutual Funds when they were correctly requested.
After reviewing 30 Royal Mutual Fund RESP accounts, ESDC determined that in 16 instances, the CESG had not been requested on behalf of RESP accounts where the clients had provided the required information and executed the necessary documents to apply for the CESG.
When going back to 1998, Royal Mutual Funds discovered 1,475 RESP accounts that were eligible for the CESG but where it had not been requested, meaning approximately $1,045,046 in missed CESG payments (the exact figure would depend on ESDC discretion on eligibility.)
Upon the findings the firm requested payments from ESDC where it was still possible to do so, a total of $295,405, and also made compensatory payments of $749,641 where the missed payments could no longer be claimed from the Canada Education Savings Program.