BMO seeks settlement in case alleging ‘excess’ client fees
Ontario regulator staff found ‘no evidence of dishonest conduct’
Bank of Montreal is the latest Canadian bank seeking a settlement with regulators after discovering some retail fund clients were charged “excess” fees over a period of years.
A hearing is to take place Thursday at the Toronto headquarters of the Ontario Securities Commission where commissioners will consider whether it is in the public interest to approve a nocontest settlement with Bank of Montreal subsidiaries including BMO Nesbitt Burns Inc. The respondents in the case include BMO Private Investment Counsel Inc., BMO Investments Inc., and BMO InvestorLine Inc.
A statement of allegations filed by the OSC late Monday said BMO “promptly self-reported” inadequacies in its systems of controls and supervision that resulted in certain clients paying excess fees, either directly or indirectly, that were not detected or corrected by BMO in a timely manner.
The statement says staff at the regulator found “no evidence of dishonest conduct.”
BMO joins a list of Canadian financial institutions including Toronto-Dominion Bank and Canadian Imperial Bank of Commerce, and Bank of Nova Scotia in seeking a no-contest settlement with regulators after discovering that some clients had paid more in fees than they should have. A no-contest settlement does not require an admission of wrongdoing.
In an October no-contest settlement, CIBC said it would pay cli- ents of its investment dealers more than $73 million as reimbursement for charging them excess fees.
The OSC also said that the dealers paid $3 million “to advance the OSC’s mandate of protecting investors, plus a further payment of $50,000 to be allocated toward the costs of the investigation.”
In July, three wealth management companies owned by Bank of Nova Scotia agreed to pay $20 million to clients. TD agreed to pay $13.5 million in November of 2014 after at least 10,000 client accounts were charged excess fees on investments.
In BMO’s case, some clients with fee-based accounts paid excess fees between Jan. 1, 2008, and April 30, 2016, because embedded trailers fees were also included in account fee calculations, according to the statement of allegations.
In other cases, some clients were not advised that they qualified for a fund series with a lower management expense ratios (MER).
The statement of allegations did not include the number of clients affected, or quantify the excess fees paid. “The BMO registrants either have already taken or are taking corrective action, including implementing additional controls, supervisory and monitoring systems, to prevent the re-occurrence of the control and supervision inadequacies in the future,” the OSC said.
The BMO registrants either have already taken or are taking corrective action, including implementing additional controls.