TD settled a $70.25 million class action in 2025 over trailing commissions charged at their discount brokerage. The same legal theory applies to every major Canadian bank. Here's what happened, who qualifies, and what's coming next.
Trailing commissions (trailer fees) are annual payments embedded in a mutual fund's MER. Typically 1.0% of your balance per year. The fund company pays this to the dealer (brokerage) who sold you the fund, and the dealer passes most of it to your advisor. It's compensation for ongoing advice and service.
The problem: discount brokerages like TD Direct Investing, RBC Direct Investing, and BMO InvestorLine don't provide advice. You're a DIY investor. There is no advisor. But the brokerage was still collecting trailer fees on your mutual fund holdings — pocketing payment for a service they never provided.
On a $100,000 mutual fund portfolio with a 1% trailer, that's $1,000/year the discount brokerage collected for doing nothing. Over a decade, $10,000+. Multiply that across millions of self-directed accounts and you get the scale of this issue.
This wasn't a grey area. The Canadian Securities Administrators formally banned trailing commissions at discount brokerages (OEO — Order Execution Only — dealers) effective June 1, 2022. The regulators acknowledged what investors had been saying for years: charging for advice at a no-advice platform is wrong. The class actions cover the period before the ban.
In June 2025, TD agreed to settle a class action lawsuit for $70.25 million. The class covers anyone who held mutual funds with trailing commissions in a TD Direct Investing account during the class period (approximately 2009-2022).
Individual payouts depend on how much you held and for how long. If you had $50,000 in trailer-paying mutual funds at TD Direct Investing for 5 years, you might have paid approximately $2,500 in trailer fees. Your share of the settlement would be a fraction of that — class actions rarely return 100% of losses after legal fees and administration costs. Expect 15-30% recovery as a rough estimate.
How to claim: If you're a class member, you should receive notification from the settlement administrator. If you held mutual funds at TD Direct Investing during the class period and haven't heard anything, contact the settlement administrator or check the class action law firm's website. You generally don't need to do anything proactively — the brokerage has records of your holdings.
TD settled. The same legal arguments apply to every other Canadian bank with a discount brokerage arm.
| Bank / Brokerage | Collected Trailers? | Class Action Status | Estimated Exposure |
|---|---|---|---|
| RBC Direct Investing | Yes (pre-2022) | Active — lawsuit filed | Potentially larger than TD given RBC's AUM |
| BMO InvestorLine | Yes (pre-2022) | Active — lawsuit filed | Significant |
| CIBC Investor's Edge | Yes (pre-2022) | Active — lawsuit filed | Significant |
| Scotia iTRADE | Yes (pre-2022) | Pending | Significant |
| National Bank Direct | Yes (pre-2022) | Pending | Moderate |
| Questrade | Stopped earlier | Less exposure — rebated trailers sooner | Lower |
TD was first but won't be last. The legal theory is identical across all discount brokerages. TD settled rather than fight, which sets a strong precedent. RBC, BMO, and CIBC are likely to follow with their own settlements. If you held mutual funds at any discount brokerage before June 2022, you may eventually be part of a class.
Let's do the math on a real scenario. Say you held $75,000 in RBC Select Balanced Portfolio (Series A) at RBC Direct Investing from 2015 to 2022. The fund's MER was about 1.89%, of which roughly 1.0% was the trailing commission.
Now multiply that across hundreds of thousands of self-directed investors. The total trailer fees collected by Canadian discount brokerages is estimated in the billions. The $70.25M TD settlement is a fraction of what TD actually collected.
This is separate from the MER problem. Even after the trailer fee ban at discount brokerages, Series A mutual funds still charge high MERs that include the trailer — the fund company just keeps that portion instead of passing it to the dealer. To truly stop paying trailers, you need to switch to Series D or Series F funds, or move to ETFs entirely.
If you still hold Series A mutual funds in a self-directed/discount brokerage account, the trailer fee ban means the fund company is keeping the trailer portion instead of paying it out. You're still paying the full MER. Switch to Series D (if available) or buy ETFs instead.
If you receive a letter about a class action settlement from your bank or brokerage, read it. Many Canadians assumed these were junk mail. They're not. You may be entitled to money back without doing anything except not opting out.
Since 2017, brokerages must disclose trailing commissions on your annual statement. Check what you were paying. This is your evidence of what the brokerage collected.
Class action settlements recover pennies on the dollar. The real money is in your future fee savings. Switching from a 2% MER mutual fund to a 0.20% ETF saves you 1.8% per year going forward. On $100,000, that's $1,800/year — every year. The class action might get you a one-time payment of a few hundred dollars. Switching saves you thousands.
The class action covers the past. Your future fee savings are in your hands.
How to Switch Calculate Your SavingsNothing on this site is legal or financial advice. Class action settlements, eligibility criteria, and timelines are subject to court approval and change. Verify settlement details through the official class action administrator or the law firms involved. We are not affiliated with any class action lawsuit. Some links on this site are affiliate links.