The Ontario Securities Commission (OSC) is set to consider its second no-contest settlement involving allegations that various TD Bank subsidiaries essentially overcharged retail investment clients.
The OSC said Friday it plans to hold a hearing on Nov. 13 to consider a no-contest settlement between staff of the commission and a trio of TD firms, TD Waterhouse Private Investment Counsel Inc., TD Waterhouse Canada Inc., and TD Investment Services Inc. The terms of the proposed settlement will only be released if the deal is approved by the commission.
According to the statement of allegations released by the OSC, TD self-reported four different incidents of client overcharging. It says that deficiencies in the firms’ compliance systems “resulted in clients paying, directly or indirectly, excess fees that were not detected or corrected… in a timely manner.”
Two of those episodes involve mutual funds managed by TD Asset Management Inc. that carried embedded advisor fees being held in fee-based accounts; and, “being incorrectly included in account fee calculations, thereby resulting in some clients paying excess fees” between November 2000 and February 2014 at TD Private Investment Counsel, and between December 2007 and September 2014 at TD Waterhouse.
The two other episodes involve clients paying excess fees when the firms failed to advise them that they qualified for a lower-MER version of certain TDAM managed mutual funds, both within and outside the TD Managed Assets Program.
The OSC alleges that in each of the four instances, the TD firms failed to establish, maintain and apply adequate controls and supervision. The new no-contest settlement policy at the OSC allows firms to settle enforcement actions without specifically admitting any violations of securities laws.
The allegations also indicate that TD intends to pay compensation to clients and former clients in connection with these matters; and, that the firms have begun taking corrective action, including implementing additional controls and supervision to prevent the re-occurrence of these matters in the future.
TD issued a statement in response to the OSC’s notice, indicating that it has launched a process to inform and compensate affected clients.
“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,” it says; adding that it, “has resources in place to be available to answer client questions and is reaching out to impacted clients to ensure they understand that the issue has been corrected and that they will be compensated for the additional fees they have paid.”