TD Asset Management Class Action Lawsuit Certified

A lawsuit alleging TD Asset Management was paying trailing commissions to discount brokers for nonexistent services and consultation for customers, has been certified as a class action lawsuit Canada. Investors who have suffered financial losses by paying trailing fees to discount brokers may now join the TD Asset Management class action lawsuit.

Investors Paying Trailing Fees to Discount Brokers Sparks Class Action Lawsuit

In late 2017, plaintiff Gary Stenzler discovered the TD Management Assets was paying trailing fees to discount brokers for providing investment advice, although none was being given to consumers. The TD Asset Management class action lawsuit explains that investors had their mutual funds’ value diminished, therefore ultimately reducing the return on investment.

Gary, from Richmond Hill, Ontario is a retired dentist who invested in mutual funds for his future and the future of his family. Gary owned units of mutual funds that were developed and managed by TD Asset Management. 

Gary held shares of TD mutual funds including TD diversified monthly income funds, TD Canadian Money Market Fund, TD Canadian Index Fund, TD North American Dividend Fund, and TD Canadian Small-Cap Equity Fund.

According to the TD Asset Management class action lawsuit, the mutual funds were distributed through “full service” and inexpensive “discount brokers” that were attractive to investors with a do-it-yourself-attitude. TD Asset Management allegedly does not deny paying trailing commissions to both full service and discount brokers that sold mutual funds to their customers.

Full-service brokers can receive trailing fees because they provide investment advice to customers, but the TD Asset Management class action alleges that Gary and Class Members suffered losses because they were having trailing fees deducted from their mutual fund investments from discount brokers. 

The class action lawsuit Canada alleges the firm caused investors tens of millions of dollars in losses. Gary went ahead and initiated legal action for his losses.

Investors Receive No Benefit Paying Trailing Commissions

TD mutual fund investors have been paying trailing fees that are subtracted from their mutual fund investments, but they are not receiving any financial investment advice from discount brokers. 

Trailing commissions are fees that come following the sale of an investment over the course of its lifetime. Trailing commissions are usually paid yearly to firms that sold the investment product to pay the firm for its services. But, according to the lawsuit, the trailing commissions offer more kickbacks than pay for services.

Lawyers from Siskinds who are representing the TD Asset Management class action lawsuit explain that trailing commissions are “paid on mutual funds are intended to compensate mutual fund dealers for investment advice they provide to investors. Mutual funds also pay trailing commissions to discount brokers.”

And the lawyers also describe discount brokers, saying they “primarily operate online and include BMO InvestorLine, TD Direct Investing, RBC Direct Investing, CIBC Investor’s Edge, Scotia iTRADE and National Bank Direct Brokerage. They are not allowed to provide investment advice. Since no advice is provided to investors who purchase mutual funds through discount brokers, these investors receive no value for the trailing commissions that are deducted from their mutual fund investments.”

In the last decade, investment firms paying trailing fees to discount brokers has been a concerning trend in the mutual fund sector. Concerns over trailing commissions being paid to discount brokers have been debated for years and finally, in June 2018, the Canadian Securities Administrators decided paying discount brokers trailing fees is unjustifiable. The regulation of trailing commissions is expected in the future, but for now, the practice is still being done.

Trailing Fees to Discount Brokers Breaches Fiduciary Duties

TD Asset Management is accused of breach of trust and violations of fiduciary duties for inappropriately paying trailing commissions to discount brokers.

Gary and the proposed Class Members are alleging TD Asset Management has paid excessive and undeserved fees for mutual funds because trailing commissions are included in the fees.

Now that the TD Asset Management class action lawsuit is certified, Class Members are defined as anyone, regardless of residence, who has or had shares of TD mutual funds through a discounted broker.

If successful,TD Asset Management will pay Gary $75,000 according to the class action lawsuit. $200 million, or another sum found appropriate by the Court, in damages is being sought in the TD Asset Management class action lawsuit.

The TD Asset Management class action lawsuit alleges that the investment firm was supposed to present itself honestly, in the best interest of each mutual fund customer, and operate with a reasonable degree of care. The class action lawsuit also posits responsibility lies with TD Assets Management for any losses endured by their own negligence.

Have you invested in TD mutual funds with a discount broker? Are you considering joining the TD Asset Management class action lawsuit? Why or why not? Share your experience in the comments section below.

Gary and proposed Class Members are being represented by Michael G. Robb, Garrett M. Hunter, and Anthony O’Brien of Siskinds LLP and Paul Bates of Bates Barristers P.C.

The TD Asset Management Class Action Lawsuit is Gary Stenzler v. TD Asset Management Inc., Case No. CV-18-595380-CP, in the Superior Court of Justice, Ontario, Canada.

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