Two subsidiaries of the Royal Bank of Canada have agreed to pay $45 million to settle a class-action lawsuit alleging that some mutual fund investors were charged fees inappropriately. The settlement involves RBC Global Asset Management Inc. and RBC Investor Services Trust, according to an announcement by Siskinds LLP, the Toronto-based law firm representing the plaintiffs.

The lawsuit centers on trailing commissions embedded in certain mutual fund fees that compensate dealers for providing investment advice. The contention is that these commissions were also paid to discount brokers, including RBC Direct Investing and CIBC Investor's Edge, which primarily offer online, order-execution services without investment advice. Discount brokers, often referred to as do-it-yourself (DIY) brokers, do not provide personalized advisory services, according to court documents filed on June 29.

Peter Ross, the plaintiff who initiated the legal action in December 2018, argued that RBC’s subsidiaries improperly paid these trailing commissions to discount brokers for services that were never rendered. This practice, he alleged, resulted in inflated management fees. The defendants have denied any wrongdoing.

Eligible investors for this class action are those who held units in RBC or PH&N mutual funds through a discount broker at any point between December 28, 2003, and July 25, 2024. A hearing to seek court approval for the settlement is scheduled for September 8 at the Ontario Superior Court of Justice. During this proceeding, the court will also review a motion to approve legal fees, which will be capped at $12.6 million.

This case is part of a broader pattern of litigation targeting mutual fund trustees and managers at major Canadian financial institutions. Siskinds LLP has filed similar lawsuits against other banks, including a $70.25 million settlement reached with TD Asset Management Inc. in 2024 and a $26 million settlement with Canadian Imperial Bank of Commerce that was approved last November.