CIBC reaches settlement with regulator over self-reported errors
According to a report on the Globe and Mail, three divisions of Canadian Imperial Bank of Commerce have reached a settlement deal with the Ontario Securities Commission after revealing that they overcharged clients for up to 14 years.
Allegations revealed by the OSC involve CIBC World Markets, CIBC Investor Services Inc. and CIBC Securities Inc. According to the regulator, certain CIBC clients with fee-based accounts paid excess fees for selected mutual funds, structured notes, ETFs, and closed-ended funds as far back as 2002. This was because embedded fees for various products were included in the calculations of overall account management fees, resulting in double-charging of fees.
Aside from that, some clients were also not advised that they met the minimum investment requirements to be eligible for lower-cost mutual funds within the same class, and thus were sold funds with higher management expense ratios. The OSC said the problem went back as far as August 2006.
CIBC self-reported the errors to commission staff, and declared its intention to compensate affected clients and correct weaknesses in internal controls.
The amount by which clients were overcharged was not disclosed in the OSC’s release. A hearing will be held to approve a settlement in the case, but the terms will not be disclosed until approval is given.
CIBC is not the first investment firm to face the OSC for overcharging clients on fees. In July, three Bank of Nova Scotia divisions agreed to pay $20 million as compensation to nearly 46,000 clients who overpaid for investments back to 2009. In February, CI Investments settled to return $156 million to 360,000 mutual fund investors who were overcharged due to an error in calculating fund valuations. And back in 2014, three subsidiaries of TD Bank also agreed to repay $13.5 million to clients that were overcharged.
Related stories:
Scotia to pay $20 million in client compensation
TD Bank’s investment arm overcharges mutual fund clients
Allegations revealed by the OSC involve CIBC World Markets, CIBC Investor Services Inc. and CIBC Securities Inc. According to the regulator, certain CIBC clients with fee-based accounts paid excess fees for selected mutual funds, structured notes, ETFs, and closed-ended funds as far back as 2002. This was because embedded fees for various products were included in the calculations of overall account management fees, resulting in double-charging of fees.
Aside from that, some clients were also not advised that they met the minimum investment requirements to be eligible for lower-cost mutual funds within the same class, and thus were sold funds with higher management expense ratios. The OSC said the problem went back as far as August 2006.
CIBC self-reported the errors to commission staff, and declared its intention to compensate affected clients and correct weaknesses in internal controls.
The amount by which clients were overcharged was not disclosed in the OSC’s release. A hearing will be held to approve a settlement in the case, but the terms will not be disclosed until approval is given.
CIBC is not the first investment firm to face the OSC for overcharging clients on fees. In July, three Bank of Nova Scotia divisions agreed to pay $20 million as compensation to nearly 46,000 clients who overpaid for investments back to 2009. In February, CI Investments settled to return $156 million to 360,000 mutual fund investors who were overcharged due to an error in calculating fund valuations. And back in 2014, three subsidiaries of TD Bank also agreed to repay $13.5 million to clients that were overcharged.
Related stories:
Scotia to pay $20 million in client compensation
TD Bank’s investment arm overcharges mutual fund clients
