A Bank of Montreal (BMO) sign is seen outside of a branch in Ottawa, Ontario, Canada, August 23, 2016.Chris Wattie
Four divisions of Bank of Montreal will repay almost $50-million to 60,393 client accounts that were overcharged on their fee-based accounts and on mutual-fund costs for eight years between 2008 and 2016.
The Ontario Securities Commission's settlement deal unveiled Thursday with the BMO units is the sixth no-contest settlement the regulator has reached with financial institutions over the past two years related to repayments of excess fees, resulting in $320-million in compensation returned to clients.
As in prior cases, BMO self-reported the fee problems to the OSC after undertaking an internal review of its systems amid a spate of OSC investigations into similar problems at other institutions.
Bank of Montreal spokesman Ralph Marranca said the bank is pleased the OSC approved the settlement deal and the affected companies will begin compensating clients this month for their losses.
"We have taken steps to prevent this from ever happening again," Mr. Marranca said.
Under the terms of the settlement approved Thursday, the BMO units will pay $49.9-million to reimburse clients and will contribute $2.1-million to OSC investor-protection initiatives. They will also pay $90,000 to cover OSC investigation costs, for total payments of $52.1-million. The allegations involve 60,393 client accounts.
The allegations involve BMO Nesbitt Burns Inc., BMO Private Investments Counsel Inc., BMO Investments Inc. and BMO InvestorLine Inc., which agreed to the settlement without admitting or denying allegations that they had inadequate controls and supervision processes that resulted in clients paying excess fees.
The OSC alleged some clients with fee-based accounts paid excess fees as far back as 2008 because products with embedded fees were included in the calculations of their account management costs, resulting in clients paying double on some investments. The problem affected more than 46,300 client accounts, leading to $44-million in repayments to customers.
The commission also alleged some clients bought mutual funds without being told they qualified for lower-cost funds in the same family because of the size of their investments, instead buying funds with higher management-expense ratios. The OSC said the overpayments involved more than 14,000 client accounts and repayment of $5.9-million.
The OSC said it found "no evidence of dishonest conduct" by the BMO units and said the companies provided "prompt, detailed and candid co-operation" and created a plan to return money to the affected clients.
The BMO units also hired a third party to verify the identification of affected clients and the methodology used to figure out compensation, which includes repayments for foregone investment opportunities at a 5-per-cent annual rate.
The OSC has previously reached settlements with three divisions of Canadian Imperial Bank of Commerce, three Bank of Nova Scotia units, three subsidiaries of Toronto-Dominion Bank and Quadrus Investments Services Ltd.
Its biggest settlement deal was with mutual-fund company CI Investments Inc., which settled allegations it made errors in calculating mutual-fund valuations, agreeing to return $156-million to 360,000 clients who bought mutual funds over a five-year period.