Staff of the Ontario Securities Commission have negotiated a settlement agreement with several divisions of Toronto-Dominion Bank after they revealed they overcharged fees to clients on certain accounts between 2000 and 2014.
The regulator said Friday that it learned of the issues from TD, which self-reported the fee problems after discovering them internally. A statement of allegations released Friday does not reveal the dollar value of the excess fees charged to clients as a result of calculation errors, but the amounts are likely to be significant given that some of the issues stretch back as long as 14 years.
The settlement agreement with the bank subsidiaries will be presented for approval at a hearing on Nov. 13. The terms of the settlement will not be disclosed until it is approved by the tribunal, but the OSC said the settlement has been concluded on a no-contest basis, which means TD will not have to make admissions of wrongdoing.
The OSC alleges there were inadequacies in TD's internal controls and supervision that resulted in clients paying excess fees "that were not detected or corrected by the TD entities in a timely manner."
TD would not comment Friday on the amount of money overpaid in client fees. Spokeswoman Meghan Thomas provided an e-mailed statement saying compensation is already being made to clients who were "directly or indirectly" overcharged.
"TD Wealth self-reported the issues to the Ontario Securities Commission and other regulators and has already formulated a plan to, and is currently in the processes of, notifying and compensating clients and former clients impacted by the overcharges," the statement said.
The OSC statement of allegations said two of the four errors involved fees charged on investment products that had adviser fees embedded into their cost, including some mutual funds managed by TD Asset Management Inc. that were held by clients with fee-based accounts. Clients with fee-based accounts typically pay fees based on a set percentage of the assets in the account.
The OSC said some managed mutual funds with embedded adviser fees that were held in fee-based accounts at TD Waterhouse Private Investment Counsel Inc. were incorrectly included when calculating account fees owed by the clients, resulting in some clients paying excess advisory fees between 2000 and 2014.
Similarly, the OSC said some investment products with embedded adviser fees held in fee-based accounts at TD Waterhouse Canada Inc. were incorrectly included in account fee calculations, resulting in excess payments between 2007 and 2014.
The other two fee errors involved clients who purchased TD mutual funds from TD Waterhouse and from TD Investment Services Inc. without being informed that they qualified for lower-fee premium funds. In both cases, the OSC alleged clients indirectly paid excess fees because they bought mutual funds with higher management expense ratios.
The statement of allegations says TD divisions have begun taking corrective action including implementing additional controls and supervision.
The OSC alleged TD breached control and supervision standards, and said its "supervision inadequacies" were contrary to the public interest.