A class action lawsuit regarding trailing commissions paid to discount brokers on CIBC mutual funds has been proposed against the Canadian Imperial Bank of Commerce and CIBC Trust Corp.
The lawsuit alleges investors who hold the mutual funds in discount brokerages receive no value for the trailing commissions paid.
The allegations have not been proven in court.
The case filed by Siskinds LLP and Bates Barristers PC seeks compensation for those investors.
Siskinds and Bates Barristers have filed two other cases related to trailing commissions on mutual funds sold through the discount brokerage channel.
The firms have proposed a class action case against Scotiabank’s 1832 Asset Management LP as well as another against TD Asset Management Inc., the trustee and manager of TD mutual funds.
The latest lawsuit proposed against CIBC comes on the heels of CSA proposals to limit trailing commissions to transactions that include advice. With the proposal, discount brokers would have to charge investors directly for services, which CSA says would lead to increased fee transparency.
Currently, trailing commissions aren’t defined under CSA’s mutual fund sales practices rules (NI 81-105). In its latest proposals, CSA aims to remedy that by broadly defining trailing commissions to refer to continuing payments for all client services connected to mutual fund ownership.
The proposals further outline a ban on deferred sales charges, which the Ontario government doesn’t support.
IIROC guidance published earlier this year says brokerages must aim to offer fund series that don’t pay trailing commissions for advice or must otherwise rebate to clients the portion of trailing commissions that pays for advice.