Investors Group to pay $750K penalty for overcharging investors

Investors Group Financial Services has agreed to pay a $750,000 penalty to the Treasury of the Province of Manitoba after overcharging clients.

Investment dealer paid $79M to affected clients

Investors Group Financial Services has paid a $750,000 fine to the Treasury of the Province of Manitoba, the largest ever required. (Tyson Koschik/CBC)

Investors Group Financial Services has agreed to pay a $750,000 penalty after overcharging clients — the largest ever from the Manitoba Securities Commission.

The Manitoba Securities Commission, an operating agency in the province that regulates capital markets, negotiated the penalty after the financial services company overcharged more than 93,000 clients for managing mutual funds. 

Investors Group offers a number of mutual funds and there are different series of the same fund. Those series have varying management expense ratios or MERs, the amount of money the fund is charged for being managed. 

Starting in 2012, Investors Group had a series with a lower management expense ratio when clients hit certain investment limits — more money invested meant clients would pay lower managing fees. 

Clients who invested more than $500,000 in certain accounts and products were supposed to be eligible, but by 2014, about 45 per cent of eligible investors were paying too much, the settlement agreement between the commission and Investors Group said.

When Investors Group became aware of the problem in 2014, it contacted the commission and began working to rectify the situation, the settlement said.

"Investors Group reviewed their processes internally.... When they identified they had an issue, they actually came to us," said Chris Besko, director of the Manitoba Securities Commission.

About $79 million was paid out to 93,941 affected clients. 

The financial penalty, paid to the Treasury of the Province of Manitoba, was confirmed during a hearing last week. Investors Group also agreed to pay $30,000 to the commission for expenses. 

Besko said Investors Group co-operated with the commission and paid investors back quickly, but the financial penalty was based on similar cases from investment firms in other provinces. 

Besko said it was important to let other financial services companies know "if your systems are not up to the requirement, there is a penalty for that."