A U.S. investor rights firm has filed a class-action lawsuit on behalf of TD Bank’s U.S. shareholders, alleging that TD made “false and/or misleading statements” about how the bank grew its assets.
The allegations come in the wake of a CBC News article released last week that reported TD employees said they were under “‘incredible pressure’ to squeeze profits from customers by signing them up for products and services they don’t need.”
A follow-up report released Friday suggests the problem, as reported by CBC News, could be wider spread:
Hundreds of current and former TD Bank Group employees wrote to Go Public describing a pressure cooker environment they say is “poisoned,” “stress inducing,” “insane” and has “zero focus on ethics.”
Some employees admitted they broke the law, claiming they were desperate to earn points towards sales goals they have to reach every three months or risk being fired.
TSX-listed TD shares fell more than 5% on Friday but recovered 1.45% on Monday.
In a statement issued Sunday, TD Bank CEO Bharat Masrani said he doesn’t believe the reports are an accurate portrayal of the bank’s workplace, but he takes the concerns the story raises seriously.
“TD is in the trust business,” Masrani said in the statement. “We know we must earn our customers’ trust before we earn their business.”
Also on Sunday, Rosen Law Firm, an investor rights firm based in New York, filed a class-action lawsuit in the U.S. District Court of New Jersey on behalf of purchasers of TD’s NYSE-listed shares from December 3, 2015 through March 9, 2017, seeking recovery of investor losses. The lawsuit names Masrani and the bank’s two CFOs during the class period.
No class has yet been certified.
Among other things, the lawsuit alleges that TD failed to disclose that its “wealth asset growth and increased fee-based revenue was spurred by a performance management system that led to its employees breaking the law at their customer’s expense in order to meet sales targets” and that “[TD Bank] lied to customers as to the risk of TD Bank’s products.”
Further, “When the true details entered the market, the lawsuit claims that investors suffered damages,” Rosen Law Firm says in a release.
The allegations have not been proven in court.
A TD spokesperson tells Advisor.ca that the bank cannot comment on any litigation.
The head of Canada’s main financial services ombudsman says allegations about aggressive sales tactics by TD Bank employees raise “serious concerns” and the watchdog will be keeping an eye out to see if similar issues persist in the broader industry.
“We’ll certainly be monitoring our complaint volumes and monitoring the situation,” Sarah Bradley, the head of the Ombudsman for Banking Services and Investments, said in an interview with The Canadian Press Monday.
Bradley is urging consumers who have encountered such issues to file a complaint with their financial institution.
“Financial institutions have 90 days to deal with it, but if they’re still unsatisfied then that’s where OBSI comes in,” Bradley said. “We’re here to help them resolve those disputes.”
OBSI is an impartial arbitrator that serves as an alternative to expensive legal battles by resolving disputes between banks or investment firms and their clients.
TD Bank left the organization in 2011 in favour for another arbitrator called ADR Chambers Banking Ombuds Office, following in the footsteps of Royal Bank, which did so several years earlier.
ADR Chambers declined to comment on the matter, saying that the investigations it conducts are confidential.
In an email to The Canadian Press, the Financial Consumer Agency of Canada said that it’s “concerned about and is investigating allegations about financial institutions signing consumers up for products or services without providing all the required information, particularly about fees related to the products.”