Ontario Court Orders $170 Million Payout in Market Timing Class Action

The case, which began in 2006, centered on claims that mutual fund managers allowed offshore hedge funds to engage in frequent trading. This practice, known as market timing, diluted the investments of long-term holders, many of whom were retirees. The Supreme Court of Canada certified the action in 2013, setting the stage for a bifurcated trial on liability and damages. In his 2023 liability ruling, Justice Koehnen found that both CI and AIC breached their duty of care by failing to prevent these activities.

During the damages phase, the court rejected the defendants' proposed "profits method" of calculation, favoring instead the "Next Day NAV method" presented by expert witness Professor Eric Zitzewitz. This approach specifically measures the dilution caused by time zone arbitrage. Consequently, the court awarded approximately $60.48 million against CI and $37.9 million against AIC, plus pre-judgment interest at 2.8% per annum. Lead counsel Peter Jervis described the judgment as a validation of the judicial system's ability to address complex financial misconduct, noting that the outcome serves as a warning to fund managers who fail to safeguard their clients' assets.