Trailer-fee class action launched

Koskie Minsky LLP has commenced a class-action lawsuit concerning the payment of trailing commissions to Canadian discount brokerages, the Toronto-based law firm announced Friday.

Trailer fees are paid  to brokers by mutual fund companies from fees charged to investors who buy mutual funds. Koskie Minsky’s statement of claim names a dozen discount brokerages.

Several Canadian financial services firm face similar proposed class actions in connection with the practice.

The Canadian Securities Administrators is moving to ban the payment of trailers to discount brokers, with rule changes to be published later this year.

Trailing commissions are designed to compensate brokers for advice and services provided to investment clients.

“Because discount brokerages cannot and do not provide advice or services to investors,” the Koskie Minsky class action alleges “that these commissions are inappropriate and unlawful and that these funds should be returned to investors.”

“Improper investment commissions whittle away the retirement savings of ordinary Canadians. The practice of collecting trailing commissions for no reason must stop,” said Kirk Baert, a partner at Koskie Minsky, in a statement.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.