Three more financial giants—Royal Bank of Canada, Bank of Montreal and National Bank—face proposed class-action lawsuits over the payment of trailing commissions to discount brokers.
London, Ont.-based Siskinds LLP and Bates Barristers P.C. of Toronto had already brought several class actions against bank-owned asset managers and one independent fund firm, seeking hundreds of millions of dollars in damages. Today, the law firms announced three additional lawsuits: against BMO Investments Inc.; RBC Global Asset Management Inc. and RBC Investor Services Trust; and National Bank Investments Inc. and Natcan Trust Co.
As with their previously proposed class actions against divisions of Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Mackenzie Financial Corp., the law firms seek damages on behalf of investors over the practice of funds paying trailing commissions to discount brokers. Trailers are typically paid, at least in part, for investment advice, a service discount brokers are prohibited from providing.
“The actions allege that the defendants paid trailing commissions to discount brokers through which the mutual funds were sold or held, and that these payments were improper because the investors in these mutual funds received no value (such as professional investment advice) for the trailing commissions paid. The actions seek compensation for the affected investors,” Siskinds and Bates Barristers stated in a release announcing the proposed lawsuits.
None of the proposed lawsuits against the seven financial services institutions has been certified as a class action, and the allegations have not been tested in court.
Separately, securities regulators are considering possible reforms to outlaw the practice of funds paying trailers to discount brokers.