The Investment Industry Regulatory Organization of Canada (IIROC) has entered into a settlement agreement with CIBC World Markets Inc., wherein CIBC admits that clients weren’t charged appropriately by its systems between 2014 and 2021. To remedy the error, working with Deloitte LLP, the firm developed a comprehensive remediation plan to identify and correct all accounts impacted by the fee issue.
“Any client that was overcharged as a result of the fee issue will receive a full refund of the overcharged amount, along with the opportunity cost,” the regulator writes in its settlement agreement with the firm.
For failing to establish and maintain a system of controls and supervision to ensure client fee agreements were accurately recorded in its fee management systems and clients were charged appropriately, CIBC agreed to a fine in the amount of $119,000 and costs totalling $5,000. As part of its remediation plan the firm plans to pay $7.02-million to 12,780 affected accounts. “As of November 2022, the respondent has remediated all active account holders and 74 per cent of closed account holders who were overcharged between 2014 and Q3 2022 as a result of the fee issue,” they add.
The case was settled with the regulator by early resolution offer where staff agreed with a 30 per cent reduction in the sanctions IIROC would otherwise seek, based on the firm’s proactive “and exceptional” cooperation, remedial measures and willingness to resolve the matter in a timely manner.
First discovered in 2021, when a client opens certain accounts with CIBC, the agreed upon fee arrangements between the advisor and the client are recorded in a client account managing system and fee-billing engine which calculates and charges fees on a monthly or quarterly basis.
“The respondent discovered a few instances where fees charged to clients in fee-based accounts differed from the fees documented in the client account management system. Subsequently the respondent identified that the issue affected more than just a few client accounts,” the settlement agreement states. They add that the issue could be traced largely to a technology and transcription issue. The regulator also notes that the firm proactively reported itself to regulatory authorities when the error was discovered – a mitigating factor along with the fact that the firm also promptly shared detailed findings of its own review with IIROC’s enforcement staff.
Any fees that are not deposited by former clients and those less than $25 will be donated to charity without benefit to the firm, they conclude.
