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In Stenzler v TD Asset Management Inc., the Ontario Divisional Court recently denied an appeal by TD Asset Management Inc. (“TDAM”) from a decision certifying the Plaintiff’s action to recover trailing commissions he alleges were improperly paid by TDAM to Discount Brokers1.

TDAM pays trailing commissions to Discount Brokers on behalf of investors who hold TD Mutual Funds through a Discount Broker. Trailing commissions are intended to compensate mutual fund dealers and investment advisors for investment advice. Discount Brokers, however, are prohibited from providing advice to investors. In recognition of the problems with this practice, the Canadian Securities Administrators recently announced a ban on the payment of trailing commissions to Discount Brokers starting in June 2022.2

The Plaintiff in Stenzler v TD Asset Management commenced a proposed class proceeding seeking to recover the trailing commissions paid by TDAM to Discount Brokers on his own behalf and on behalf of a class of others similarly situated. The first step in a proposed class proceeding is generally for the plaintiff to seek certification, which is, in essence, court approval to prosecute the action as a class proceeding.

On February 27, 2020, Justice Belobaba certified the Plaintiff’s action against TDAM as a class proceeding.3 The main issue at certification was a technical legal dispute concerning whether the Plaintiff and proposed members of the class could bring an action against TDAM at all. The TD Mutual Funds are structured as trusts and are governed by declarations of trust. TDAM is the trustee and manager of the TD Mutual Funds. The Plaintiff and other investors who have TD Mutual Fund investments are beneficiaries of the trust. TDAM argued that the plaintiff and other TD Mutual Fund investors had no ability to sue TDAM for breach of its alleged responsibilities as trustee and manager. Justice Belobaba rejected this argument. In so doing, His Honour relied on a recent Supreme Court of Canada decision, which determined that trust beneficiaries (such as the plaintiff and other TD Mutual Fund investors) have the right to hold a trustee (such as TDAM) responsible for breach of trust.4

TDAM sought leave to appeal Justice Belobaba’s certification decision. The Ontario Divisional Court refused to grant leave. The Divisional Court’s refusal paves the way for the action to proceed as a class action and brings investors one step closer to potentially obtaining compensation for the trailing commissions TDAM paid to Discount Brokers on their behalf. 

Anthony O’Brien is a partner and Garett Hunter is an associate in Siskinds’ Class Action Department. They are counsel to the class in the trailing commission litigation against TDAM. They are also counsel in other proposed class actions against various mutual fund trustees and managers. If you held TD Mutual Funds or other Mutual Funds through a discount broker, please visit the Mutual Fund Trailing Commission Class Action webpage to sign-up and receive updates about the class actions.  


1 Discount Brokers include: TD Direct Investing, Scotia itrade, Qtrade Investor, National Bank Direct Brokerage, BMO InvestorLine, CIBC Investor’s Edge, Desjardins Online Brokerage, HSBC InvestDirect, Laurentian Bank Discount Brokerage, RBC Direct Investing, Virtual Brokers etc.

2 Canadian Securities Regulators Adopt Ban On Trailing Commissions for Order-Execution-Only Dealers, September 17, 2020.

3 Stenzler v TD Asset Management Inc., 2020 ONSC 111.

4 Stenzler v TD Asset Management Inc., 2020 ONSC 111 at para. 17.

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