A judge in Ontario has certified a class action against three Bank of Montreal subsidiaries that are alleged to have charged fees for foreign-exchange transactions that were not specifically approved by customers with registered accounts.
The action has been launched on behalf of the class by three representative plaintiffs with close ties to the investing advice industry. One, James MacDonald, formerly was an advisor for one of the defendants, BMO Nesbitt Burns Inc. (The other defendants are BMO Trust Co. and BMO Investorline Inc.) The plaintiffs are complaining about the defendants’ former practice of automatically converting U.S.-dollar investments in registered accounts (such as RRSPs, LIRAs and RESPs) into Canadian funds.
Although the Canada Revenue Agency formerly required these accounts to be in Canadian funds, the rule was changed in 2001. The plaintiffs allege that the defendants had continued to perform the foreign-exchange conversions unnecessarily until September 2011, reaping foreign-exchange fees on the transactions.
In 1999, MacDonald began inquiring into the foreign-exchange conversions and the related fees, partly as a result of inquiries from his own clients. He did not learn that the conversions were no longer required by the CRA until 2005.
There is evidence that the fees for the foreign-exchange transactions were not clearly communicated to clients and did not appear on clients’ statements.
The defendants’ position is, among other arguments, that: the management of the registered accounts were arm’s-length, commercial transactions; the defendants were entitled to make a profit on those services; they were free to choose which services they would offer; and they had no duty to offer registered accounts in foreign currency. In other words, it was just regular business and clients were free to reject the service.
Law firm Stikeman Elliott LLP has summarized part of Justice Carolyn Horkins’ take on the case: “What the plaintiffs were saying was that the defendants are not permitted to profit from unnecessary, unauthorized and undisclosed or inadequately disclosed fees, particularly in circumstances [in which] the defendants acted as the statutorily imposed trustee of the registered accounts.”
Justice Horkins also rejected the defendants’ argument that MacDonald is not an appropriate representative plaintiff because he is a former investment advi-sor with Nesbitt and should have known about the fees. IE