Three divisions of Canadian Imperial Bank of Commerce will repay $73-million to more than 80,000 customers who were charged excess fees for their investments for up to 14 years.Fred Lum/The Globe and Mail
Three divisions of Canadian Imperial Bank of Commerce will repay $73-million to more than 80,000 customers who were charged excess fees for their investments for up to 14 years.
The Ontario Securities Commission approved a settlement deal Friday with the CIBC units, which self-reported the fee problems after uncovering issues during an internal review.
Under the terms of the settlement deal, the CIBC units will pay $73.3-million to reimburse clients, and will contribute $3-million to OSC investor-protection initiatives as well as a further $50,000 to cover OSC investigation costs.
The allegations involve CIBC World Markets, CIBC Investor Services Inc. and CIBC Securities Inc., which reported that some clients with fee-based accounts paid excess fees as far back as 2002 because various products with embedded fees were included in the calculations of their overall account management fees. The result was that clients paid double fees on some investments.
The fee problems affected certain mutual funds, structured notes, exchange-traded funds and closed-end funds held in 57,888 client accounts. The clients will receive $42.7-million in reimbursement.
The CIBC units also discovered that some clients were not told they qualified for lower-cost mutual funds because of the size of their investments, and were instead sold similar funds with higher management expense ratios. The OSC said the overpayments affected 23,867 client accounts, which will receive $30.6-million in reimbursements.
The payments include reimbursement for forgone investment opportunities at a 5-per-cent annual rate.
The deal was reached under the OSC's no-contest policy, which allowed the divisions to reach a settlement without admitting or denying the allegations. The OSC said it found no evidence of dishonest conduct by CIBC dealers, and said they provided "prompt, detailed and candid" co-operation during the investigation.
CIBC has implemented new controls and supervision to ensure similar fee problems won't recur, the OSC added.
The bank provided a statement saying it is reaching out to current and former clients to provide compensation. "We regret the inconvenience this has caused our clients and have taken corrective action by implementing additional controls to prevent it from occurring again," CIBC said.
OSC enforcement director Jeff Kehoe said in a statement that companies need strong compliance systems to protect investors. "We expect registrants to have effective controls in place to deal fairly with clients with regard to fees, and to correct non-compliant conduct in a timely manner," Mr. Kehoe said.
The OSC has concluded six no-contest settlements with financial institutions over the past two years, resulting in $270-million in compensation to investors.
The cases included settlements with three Bank of Nova Scotia divisions, mutual-fund giant CI Investments Inc., Quadrus Investment Services Ltd., and three subsidiaries of Toronto-Dominion Bank.
CI Investments paid the largest settlement deal of the group, agreeing to return $156-million to 360,000 clients who bought mutual funds over a five-year period after settling allegations it made errors in calculating mutual-fund valuations. CI also made a voluntary payment of $8.05-million to the OSC.
Janet McFarland