A proposed class action alleged that since 1993, discount brokerages including those operated by TD Waterhouse Canada Inc., BMO InvestorLine Inc., Scotia Capital Inc., CIBC Investor Services Inc., Credential QTrade Securities Inc., Desjardins Securities Inc. and HSBC Securities (Canada) Inc. (the “defendants”) have improperly collected an estimated C$5 billion in trailing commissions for the provision of investing advice.
In 2020, the prohibition against the payment of trailing commissions to discount brokers, also known as OEO (“Order-Execution-Only”) or DIY (“do it yourself”) brokers was enacted, and took effect on June 1, 2022. On a motion to certify a class action lawsuit, the plaintiffs argued that the receipt of trailing commissions by discount brokers was illegal and exposed the discount brokers to damage claims long before the formal 2022 prohibition. The defendants submitted that over the 20+ years of discussion and debate of the issue, it was never suggested, and there was no evidence, that the receipt of trailing commissions by discount brokers was illegal.
In January 2023, Ontario Superior Court Justice Edward Belobaba dismissed the plaintiffs’ motion to certify a class action lawsuit on the grounds that they failed to satisfy the legal test requiring “some evidence of illegality” and thus, there was no basis for a class proceeding.
Fasken is representing TD Waterhouse Canada Inc. with respect to this matter with a team comprised of David Hausman, Vera Toppings and Mahdi Hussein, and acted as lead counsel for the defence group of six other financial institutions on the central issue resulting in the court’s decision to deny certification.
Jurisdiction
- Ontario
