Investment Dealers Could Face Class Actions For Systemic Breaches Of Their Duty To Inform

Published date11 November 2020
Subject MatterLitigation, Mediation & Arbitration, Class Actions, Trials & Appeals & Compensation
Law FirmAffleck Greene McMurtry LLP
AuthorMs Karen Bernofsky

Class Actions were created to be a more efficient and cheaper option for a number of people with common claims based on the same circumstances. However, class actions (obviously) cannot be used where an individual's claim is unique to them, as is typically the case where a client sues a financial advisor or investment advisor for not adequately advising them. These cases usually turn on what was said by the parties as well as the plaintiff's knowledge and circumstances. However, the Supreme Court of Canada's decision in Desjardins Financial Services Firm Inc. v. Asselin, 2020 SCC 30 suggests that there may be a place for class actions in a claim against an investment dealer where that dealer has systemically misled their representatives about the risks of their products. The Majority wrote:

it would be highly imprudent for this Court to declare [.] that any class action of this kind against a brokerage firm is impossible or that an action based on a representative's alleged fault is necessarily an individual action.1

Even the dissenting judges, who did not authorize this claim, left the door open for this type of claim, writing:

The liability of financial advisers for a breach of the duty to inform and the duty to provide advice is not well suited to a class action because of the highly individual nature of the relationship between a client and an adviser in the context of a contract for investment services. [.] This does not mean, however, that financial advisers are shielded from any class action for a breach of the duty to inform. If an applicant can show that the breach was systematic in nature, the common questions condition will not be an impediment to authorizing the action.2

This Class Action arises from investments managed by one company in the Desjardins Group (called the "Management" in the decision) and sold by representatives of another Desjardins Group company (called the "Firm" in the decision). The claims were different against the Firm and Management. The Claim against the Firm was concisely explained by the Supreme Court as:

Mr. Asselin alleges that Firm systematically breached its duty to inform by not adequately informing all of its representatives of the risks and characteristics of the investments (the "direct" fault). [.] the representatives, having received false, misleading or incomplete information, then failed to provide adequate information to the group's members (the "indirect" fault).3

The Claim against the Management...

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