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Two Royal Bank of Canada subsidiaries have agreed to pay $45 million to settle a lawsuit that alleges some mutual fund investors paid fees they should not have been charged.
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The class action settlement was reached with RBC Global Asset Management Inc. and RBC Investor Services Trust, Toronto-based law firm Siskinds LLP said in a notice on Tuesday.
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The case deals with commissions included in the fees charged by certain mutual funds that are paid to compensate dealers for the investment advice they provide.
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These commissions, however, were also paid to discount brokers that primarily operate online, such as RBC Direct Investing or CIBC Investor’s Edge, and are not allowed to provide investment advice, the notice said.
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A discount broker provides only order execution services and is often referred to as a DIY broker, a court document related to the case that was filed on June 29 said.
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The plaintiff, Peter Ross, who started the legal action in December 2018, alleged RBC’s subsidiary improperly paid trailing commissions to discount brokers for services and advice that were never provided, according to the court document, which increased the management fees.
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RBC’s subsidiaries denied the allegations.
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Investors who can participate in this class action include those who held units of an RBC mutual fund or a PH&N mutual fund through a discount broker from Dec. 28, 2003, to July 25, 2024.
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A hearing will take place at the Ontario Superior Court of Justice on Sept. 8 to approve the settlement. The court will also consider a motion to approve the legal fees related to this case, which may not exceed $12.6 million.
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Siskinds has filed similar lawsuits against mutual fund trustees and managers of other banks and financial companies.
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For example, a settlement was reached with TD Asset Management Inc. for $70.25 million and approved by the court in 2024. A class action settlement was reached with Canadian Imperial Bank of Commerce for $26 million, which was approved through a court order last November.
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