Ontario Court Orders $170M Payout for Market-Timing Trades

Peter Jervis, a senior partner at Rochon Genova who led the prosecution, said the award compensates investors for both the full capital loss and a reasonable rate of return over the 21 years since the OSC settlement. "We are very pleased with the damages award," he said in an email.

A contested issue was the method for assessing damages. The judge chose the next-day NAV method advocated by the plaintiffs, which measures the specific dilution caused by time zone arbitrage. The judge applied a discount because the method "is not necessarily scientifically precise," the decision says. Deductions were then made for CI's previous OSC settlement of $49.3 million and AIC's previous OSC settlement of $58.8 million, which had been paid to the managers' respective funds.

The class action began in 2006 and was certified in 2013 by the Supreme Court of Canada. It was filed against five fund managers that had reached settlements with the OSC in 2004, resulting in more than $200 million paid to their funds, according to court documents. Two of those managers, IG Investment Management Ltd. and Franklin Templeton Investments Corp., had previously settled with investors; AGF Funds Inc. had also settled.

The 2003 enforcement action by New York's attorney general first exposed market-timing trading, leading to regulatory investigations and enforcement actions in both the U.S. and Canada, the decision notes.

Jervis said a notice program will advise investors of the claims administration process. Investors can contact the claims administrator by email or phone to register for their share of the proceeds. He cautioned that the defendants have 30 days from July 16 to appeal both the 2023 liability decision and the 2026 damages decision to the Court of Appeal. "No claims process will commence until either of those appeals, if advanced, are dismissed, or if a settlement of either or both claims are made," he said. In the case of an appeal or settlement, a court-approved notice will be broadly advertised.