Raymond Chun, CEO of TD Bank Group speaks at the bank's annual general meeting in Toronto on April 10. The AGM was the first opportunity retail investors have had to confront TD’s leaders since the bank pleaded guilty to conspiracy to commit money laundering in October.Fred Lum/The Globe and Mail
Toronto-Dominion Bank board chair Alan MacGibbon says the disclosure of the bank’s anti-money-laundering failures was its “darkest day” and vows that the lender is implementing extensive reforms to fix the issues.
Mr. MacGibbon and newly minted chief executive officer Raymond Chun fielded a parade of investor questions and concerns regarding the bank’s dealings with U.S. regulators and the Department of Justice at its annual meeting Thursday. The event was the first opportunity retail investors have had to confront TD’s leaders since the bank pleaded guilty to conspiracy to commit money laundering in October.
“The settlements were extraordinarily painful,” Mr. MacGibbon said in response to a shareholder question. “The Oct. 10 public consent agreements was the darkest day that we could have imagined it to be, and I apologize to all investors for how difficult this was and the consequences of the actions.”
U.S. authorities fined the bank more than US$3-billion and levied a bevy of non-monetary penalties. As the bank works with U.S. regulators to remediate its anti-money-laundering gaps, TD says it has already made several changes to its leadership team and its risk and compliance procedures.
Shareholders lined up at the microphones to ask Mr. MacGibbon and Mr. Chun how senior leaders allowed money-laundering breaches to persist, what the bank is doing to ensure the issues don’t happen again and how the lender intends to bolster its beleaguered share price.
Raymond Chun, left, chief executive of TD Bank Group, and Alan MacGibbon, chair of the board of directors, speak at the bank's annual general meeting in Toronto on April 10.Fred Lum/The Globe and Mail
TD is redesigning its training programs at all levels, including its front-line staff, who interact directly with customers, according to Mr. Chun.
“It is about changing our culture,” he said in response to a shareholder question. “A culture of accountability and a culture of curiosity within our front lines and our second lines to ask why and be more curious to all these issues.”
Mr. MacGibbon also said senior leaders have learned more about encouraging accountability and more effectively flagging issues to senior staff.
Among the penalties imposed by U.S. authorities, one of the most severe is an asset cap that restricts the growth of the bank’s U.S. retail business.
TD is conducting a strategic review to identify new opportunities for expanding its business, even as it complies with U.S. restrictions. A key part of its plan – which is set to be unveiled later this year – focuses on its Canadian unit.
Mr. Chun said there is significant potential to expand its businesses in the Canadian market. TD’s Canadian division accounts for more than 75 per cent of its profit.
The bank is implementing new programs to expand its relationships with its customers, according to Mr. Chun. TD launched an online service that streamlines the mortgage application process and has added specialists to help clients with home buying and retirement investments.
“Those businesses have tremendous momentum,” Mr. Chun said. “The entire strategic review − a large portion of that is what we’re going to do to accelerate that momentum.”
The bank has been under significant pressure from investors to hold senior leaders accountable for the failings. Earlier this year, TD overhauled its board and said Mr. MacGibbon and former CEO Bharat Masrani would leave sooner than anticipated.
Five long-standing directors – Amy Brinkley, Colleen Goggins, Karen Maidment, Claude Mongeau and Brian Ferguson – left the board Thursday. The remaining directors joined the board since 2020.
Some of these departing directors were tasked with overseeing the bank’s compliance and risk procedures. Ms. Brinkley, Ms. Maidment and Ms. Goggins were members of the risk committee, which approves the bank’s risk frameworks and policies. Mr. Ferguson sat on the board’s audit committee.
Last fall, U.S. authorities said the bank’s audit committee was mostly filled with directors who did not have extensive banking experience.
At Thursday’s meeting, shareholders voted in favour of four new members, including two who previously worked at U.S. banks in compliance, risk and anti-money-laundering roles.
Paul Wirth was the deputy chief financial officer at Morgan Stanley, and Ana Arsov held senior roles in risk management at UBS Investment Bank, Morgan Stanley and Lehman Brothers.
The two new Canada-based directors include Elio Luongo, a former CEO of audit and advisory firm KPMG Canada, and Nathalie Palladitcheff, a former CEO of investment group Ivanhoé Cambridge.
TD expects to appoint a fifth director – Frank Pearn, who was the global chief compliance officer at JPMorgan Chase and Co. – in August.
Mr. MacGibbon was re-elected to the board with only 57.7 per cent of votes in favour. He will step down later this year as the bank conducts a search for his successor.
Investors voted against all shareholder proposals at the annual meeting, including ones calling on the bank to disclose its energy supply ratio, adopt an artificial-intelligence code of conduct and publish the language competency of its employees.
An individual shareholder also submitted proposals calling on TD to dismiss Mr. Masrani as a special adviser, replace Mr. Chun as CEO and shorten tenures for board members.