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December 31, 2007

A $73 million settlement to be paid by CIBC for overcharging customers heralds progress of the Ontario Securities Commission’s (OSC) strategy, says Toronto corporate lawyer Marlin Horst.

Horst, a partner with Shibley Righton LLP, says the payment was agreed to under the relatively new OSC “no-contest policy” in which an entity facing charges can agree to a penalty and avoid trial.

The policy was announced in 2014 and, "We’re starting to see more and more cases dealt with this way, avoiding lengthy and costly trials," Horst tells AdvocateDaily.com.

The OSC approved a settlement with CIBC World Markets Inc., CIBC Investor Services Inc. and CIBC Securities Inc. (the CIBC Dealers) after the CIBC Dealers discovered and self-reported a system glitch which led to 80,000 clients overpaying fees over a 14-year period.

CIBC agreed to pay $73,260,104 back to their clients and $3 million to the OSC “to further the OSC mandate to protect investors,” and $50,000 to cover the costs of the investigation, the OSC reported in a release.

“This settlement follows allegations by OSC Staff that there were inadequacies in the CIBC Dealers’ systems of controls and supervision, which resulted in certain clients paying excess fees that were not detected or corrected in a timely manner,” the OSC notes. “Staff do not allege, and have found no evidence of dishonest conduct by the CIBC Dealers.”

Horst says the settlement is an efficient way of dealing with a self-reported error and will make it more attractive for other regulated entities to come forward and be transparent.

“There was no evidence CIBC was intentionally out to rip off their clients,” he says. “By the time you spread that money it’s no huge windfall, maybe $1,000 or less to each client. So this is a fair way to handle it.”

Horst says the OSC is following the United State’s Security Exchange Commission’s (SEC) lead in offering settlements if the circumstances allow. To qualify, the financial entity must self-report and work transparently with OSC investigators and meet other conditions.

“The SEC is completely self-funding and I think that’s what the OSC would like to be as well,” Horst says . “It’s one thing to ban a bad trader for life but, in cases like this, coming to an agreement is a much better way of dealing with it."

The OSC reports it has approved six no-contest settlements which has resulted in some $270 million in compensation to investors.