An Ontario court has certified the seventh and final class action against a large fund manager over the alleged improper payment of trailer commissions to discount brokers.
The Superior Court of Justice certified a proposed class action against RBC Global Asset Management Inc. and RBC Investor Services Trust on behalf of investors in RBC’s funds that paid trailers to discount brokers.
“The plaintiff alleges that the trailing commissions are excessive, inflated and/or unearned, and were paid by the defendants in breach of their trust, fiduciary and contractual duties to the class members who held those mutual funds,” the court said in its certification decision.
None of the allegations has been proven.
The certification motion was not opposed by RBC.
Six other cases that make substantially similar allegations have already been certified against the other big banks’ fund managers, and one large independent.
In general, these cases allege that the fund managers improperly paid trailer commissions to discount brokers to compensate the dealers, at least in part, for ongoing advice they didn’t provide. Discount brokers are prohibited from providing advice under the terms of their registrations.
In 2022 the Canadian Securities Administrators banned the practice of funds paying trailers to discount brokers.
In certifying the case as a class action, the court noted that several other class actions making the same allegations have already been certified against other large fund managers, and that a couple of these involved contested hearings (TD Asset Management Inc. and BMO Investments Inc.).
In this case, the court found that four of the five criteria for certifying a case as a class action were met: the plaintiff has a viable case, the case raises common issues, there is an identifiable class of people to be represented, and the case makes sense to pursue as a class action.
The only issue for the court in this case was whether there’s a suitable representative plaintiff to lead the action. The court concluded that the proposed plaintiff was suitable, has an appropriate litigation plan, and a plan for notifying affected investors.