An Ontario court has denied a motion from BMO Investments Inc. that sought leave to appeal an earlier ruling, and the move allows for a proposed investor class action — over trailer fees paid to discount brokers — to go ahead.
The Superior Court of Justice dismissed the motion from BMO, which specifically sought leave to appeal a decision in May that certified a class action against the firm on behalf of discount broker clients that owned BMO funds.
The court certified the case as a class action on May 18, alleging that the funds in question improperly paid trailer fees to the discount brokers. The court concluded that there there is a potentially viable case.
None of the allegations have been proven.
Back in 2018, a series of class actions were filed against several fund companies on the same grounds — charging that they improperly paid trailer fees to discount brokers, which don’t provide advice to investors. These cases have yet to be certified.
A similar case against TD Asset Management Inc. was also certified as a class action in 2020, and the bank’s bid to appeal that certification decision also was rejected.
The Canadian Securities Administrators have taken action in this area, adopting rules that ban discount brokers from receiving trailers. Those rules take effect June 1, 2022.