The Ontario Superior Court of Justice has approved a $26 million settlement between the Canadian Imperial Bank of Commerce and a class of investors who alleged they were improperly charged trailing commissions on mutual funds held in discount brokerage accounts1. Justice Leiper released the reasons for judgment on November 19, 2025, bringing a conclusion to litigation that began more than seven years ago. The settlement resolves claims that CIBC and CIBC Trust Corporation paid fees to discount brokers for advice that was never provided to investors, a practice that the plaintiff argued constituted a breach of trust and fiduciary duty.
The class action, styled Pozgaj v. CIBC, centered on the structure of mutual fund fees paid by “do it yourself” retail investors. These investors typically hold units of mutual funds through online discount brokers who provide order execution services only. By regulation and design, discount brokers are not permitted to provide investment advice or recommendations to their clients. Despite this lack of advisory service, the plaintiff alleged that the defendants paid trailing commissions to these discount brokers out of the mutual fund assets. The claim asserted that these payments reduced the value of the investors’ units and were paid for services that simply did not exist.
Stephen Pozgaj, the representative plaintiff, commenced the action in September 2018 under the Class Proceedings Act, 1992. He sought to recover the trailing commissions paid to discount brokers along with any investment returns or interest lost due to those payments. The class includes approximately 140,000 investors who held CIBC mutual funds or Renaissance mutual funds during the relevant period. The defendants denied liability and were prepared to argue that the trailing commissions were fully disclosed in regulatory documents known as “Fund Facts” and were permitted by securities regulators at the time.
The path to settlement was lengthy and complex, involving multiple rounds of mediation and significant legal hurdles. The action was certified as a class proceeding by Justice Akbarali on January 25, 2024, which allowed the case to move forward on behalf of the entire group of affected investors. Following certification, the parties engaged in a second round of mediation in July 2025. During these negotiations, the plaintiff engaged experts to value the damages, while the defendants produced detailed payment information regarding the commissions. These efforts culminated in a settlement agreement signed on August 20, 2025, resulting in the $26 million payment.
In determining whether to approve the settlement, the court had to assess whether the agreement was fair, reasonable, and in the best interests of the class members. This assessment required weighing the settlement amount against the significant risks of continuing litigation. The defendants had signaled their intention to mount several vigorous defenses if the case went to trial. They planned to argue that the limitation period had expired for many claims, particularly for mutual fund units purchased before September 2016. Furthermore, they intended to rely on the fact that Canadian securities regulators permitted the payment of trailing commissions to discount brokers until a ban was implemented on June 1, 2022. The defendants would have argued that they complied with all regulatory requirements during the period in question and ceased the payments once the prohibition came into effect.
The settlement in this case was also evaluated in the context of other similar class actions in Ontario. The court noted that a related action, Frayce v. BMO InvestorLine Inc., which sought recovery from discount brokers rather than the mutual fund managers, was dismissed after failing to achieve certification. Conversely, another action known as the Westwood litigation, which involved similar claims against TD Asset Management, resulted in a settlement of $70.25 million in December 2024. Class counsel provided the court with a comparison showing that the recovery in the CIBC settlement compared favorably to the Westwood result. While the Westwood settlement represented a recovery of approximately 11.3 percent of total trailing commissions paid, the settlement in the Pozgaj action represents a recovery of approximately 17 percent for the combined class, and up to 20 percent for holders of CIBC Mutual Funds specifically.
Under the approved distribution protocol, the net settlement funds will be distributed to eligible class members on a pro rata basis. The calculation of damages will use a standardized formula assuming a trailing commission rate of 0.75 percent, which simplifies the administration process as the actual rates varied between 0.05 percent and 1.25 percent. The protocol also accounts for specific legal risks associated with the Renaissance mutual funds, which were added to the claim later than the CIBC funds. Due to the higher risk that these claims might be statute barred by the Limitations Act, the distribution plan applies a 20 percent inclusion rate to claims related to Renaissance funds. Consistent with the regulatory landscape, no compensation will be paid for trailing commissions on units held after the regulatory ban took effect on June 1, 2022.
The court also approved the appointment of Verita as the claims administrator. Verita previously administered the Westwood settlement, and its estimated costs for this administration range between $513,530 and $1,045,111, depending on the volume of claims and the method of payment. During the approval process, a class member raised concerns regarding Verita’s performance in the previous settlement, citing issues such as long callback times, aggressive bot detection on the website, and difficulties switching between English and French on the claims portal.
Class counsel and the administrator provided detailed responses to these concerns, which were accepted by the court. Verita clarified that its standard callback time is 24 to 48 hours and explained that strict bot detection is necessary to prevent thousands of fraudulent claims. Regarding the website’s language functionality, they noted that for security and data integrity reasons, users must select their preferred language at the start of the process and cannot switch mid stream without restarting. The court found these explanations satisfactory and approved the plan of notice and administration.
A portion of the settlement funds will be used to pay legal fees and disbursements. The court approved a contingency fee of 28 percent for class counsel, amounting to $7,280,000 plus tax. The legal team, comprised of Siskinds LLP and Bates Barristers, carried the risk of the litigation for seven years, investing nearly $1 million in time and disbursements before the settlement was reached. The fee arrangement is consistent with standard contingency agreements in class proceedings, which are designed to provide access to justice for large groups of plaintiffs who could not afford to litigate individually. The fees will be split between the two firms based on an 80/20 agreement that reflects their respective contributions and assumption of risk throughout the proceedings.
In addition to legal fees, the court approved an honorarium of $10,000 for the representative plaintiff, Stephen Pozgaj. Courts in Ontario may award such honorariums in exceptional circumstances where a representative plaintiff has gone above and beyond the call of duty. The evidence showed that Mr. Pozgaj was actively involved in every stage of the litigation, reviewing pleadings, swearing affidavits, and participating directly in the mediation sessions. He also subjected himself to public scrutiny by serving as the face of the litigation and engaging with the media to advocate for retail investors. Justice Leiper noted that the amount was modest, representing approximately seven cents per class member, and was well justified given his contribution to achieving the $26 million result.
The settlement agreement includes a cy-près provision for any funds that remain unclaimed or undistributed after the primary distribution is complete. If the remaining amount is too small to distribute economically to the class, it will be donated to the Osgoode Hall Law School Investor Protection Clinic. This clinic provides free legal advice to retail investors who believe they have been wronged and conducts research to assist regulators and policymakers. The court deemed this an appropriate recipient as its work aligns with the interests of the class members and promotes investor protection.
With the approval of the settlement, the action against CIBC and CIBC Trust Corporation is dismissed. The settlement funds, which have already been paid into trust, will now be managed by the administrator. Class members will be able to make claims through a streamlined process where available data permits, or through a full claims process for those whose information is not automatically captured. This resolution closes a significant chapter in the ongoing legal scrutiny of mutual fund fee structures in Canada, securing compensation for thousands of investors who paid for advice they never received.
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