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CIBC divisions reach deal with OSC over excess client fees

A photograph of the CIBC sign in Toronto's financial district in downtown Toronto on Thursday, Feb. 26, 2009.

NATHAN DENETTE/THE CANADIAN PRESS

Three divisions of Canadian Imperial Bank of Commerce have reached a settlement deal with the Ontario Securities Commission after revealing they overcharged fees to clients for up to 14 years.

The allegations, revealed Tuesday by the Ontario Securities Commission, involve CIBC World Markets, CIBC Investor Services Inc. and CIBC Securities Inc.

The OSC said some CIBC clients with fee-based accounts paid excess fees for certain mutual funds, structured notes, exchange-traded funds and closed-end funds 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 the clients paid double fees for the investments.

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An OSC statement of allegations said some clients were also not advised they met the minimum investment thresholds to qualify for lower-cost mutual funds within the same class, and instead were sold funds with higher management expense ratios. The OSC said the problem stretched back to August, 2006.

CIBC self-reported the errors to commission staff, the OSC said, and intends to pay compensation to clients and correct weaknesses in internal controls.

The commission did not reveal the amount clients were overcharged. It will hold a hearing Oct. 28 to approve a settlement in the case, but terms of the deal will not be disclosed until it is approved.

CIBC is the latest in a string of investment firms to face an OSC hearing for overcharging clients on mutual fund or account fees.

In July, three Bank of Nova Scotia divisions agreed to pay $20-million to compensate almost 46,000 clients who overpaid for investments back to 2009. Mutual fund giant CI Investments Inc. reached a deal in February to return $156-million to 360,000 clients who bought mutual funds over a five-year period when the company failed to detect errors in calculating fund valuations. In 2014, three subsidiaries of Toronto-Dominion Bank agreed to repay $13.5-million to clients who were overcharged fees.

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