No-contest settlement with BMO firms will see clients repaid $50 million

The Ontario Securities Commission (OSC) approved a no-contest settlement with four Toronto-based Bank of Montreal (BMO) subsidiaries — BMO Nesbitt Burns Inc., BMO Private Investment Counsel Inc., BMO Investments Inc. and BMO InvestorLine Inc. — on Thursday that will see the firms pay almost $50 million collectively in compensation to investors, make a $2.1 million voluntary payment to the regulator and pay $90,000 in costs.

Under the no-contest settlement procedure, the four BMO firms do not admit, or deny the regulator’s allegations against them, which centre on claims that inadequacies in their controls and supervision resulted in certain clients paying excess fees over several years. For example, certain clients in fee-based accounts were also charged embedded trailers, and other clients were not put into lower-cost versions of certain funds when they qualified for them, according to the settlement.

The OSC does not allege that the firms engaged in any dishonest conduct and the settlement indicates that the firms self-reported the issue; co-operated with the regulator’s investigation; initiated the plan to compensate harmed investors; and have bolstered controls to fix the compliance issues.

This case represents the seventh time the OSC has used its no-contest settlement procedure to resolve an enforcement action since it adopted the process in 2014.

“The no-contest settlement is a strong enforcement tool that has resulted in more than a quarter of a billion dollars [approximately $320 million] in compensation to investors,” says Jeff Kehoe, director of enforcement with the OSC, in a statement.

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