Two decades after the claim was filed, a judge sides with retail unitholders over trading harm
An Ontario Superior Court judge has ordered CI Mutual Funds Inc. and AIC Limited to pay class members combined damages and interest exceeding $170 million, closing out a class action that began nearly 20 years ago.
Justice Markus Koehnen issued the ruling on July 16, following a case brought by law firm Rochon Genova on behalf of long-term mutual fund investors. The suit, filed in 2006, claimed the two fund managers allowed certain offshore hedge funds to trade in and out of their funds rapidly, a practice known as market timing, which diluted returns for buy-and-hold investors, a group that included a large number of retirees.
Rochon Genova has acted for the plaintiffs throughout the case's history, including a Supreme Court of Canada appeal after an earlier certification ruling. The top court certified the class action in 2013, and the matter was later split into separate liability and damages phases.
The liability trial ran across February, March and June 2022, with Koehnen ruling in February 2023 that both CI and AIC had breached their duty to prevent market timing within their funds.
Damages were argued before Koehnen from March 28 to May 16, 2025, with closing arguments heard over three days at the end of July and start of August that year. Combined, the liability and damages phases took 41 trial days: 24 for liability and 17 for damages.
In assessing how much the investors were owed, Koehnen sided with the plaintiffs' expert witness, Professor Eric Zitzewitz, adopting what's known as the Next Day NAV method for calculating losses. The judge found this approach properly captured the dilution caused by time-zone arbitrage, whereas the "profits method" put forward by CI's expert was rejected for measuring the wrong thing entirely, with the court concluding the conditions needed to justify using it hadn't been met.
CI was ordered to pay $60,480,000 for harm tied to its failure to curb timing activity by accounts the plaintiffs had specifically identified, plus further damages linked to additional accounts Zitzewitz determined had also engaged in harmful timing. AIC's total came to $37,900,659, covering both the identified and additional accounts found to have caused losses to unitholders.
On top of the damages, the court awarded the class pre-judgment interest at 2.8% annually, along with costs against both fund managers.
"The damages decision sends a clear message that those who fail to safeguard investors from harmful market practices will be held accountable,” said Peter Jervis, the senior partner at Rochon Genova who led the case. “That this result was achieved after two decades of hard-fought litigation, is a testament to the perseverance of the Representative Plaintiffs and Class Counsel, and to the strength of our judicial system in delivering access to justice in complex cases."
Joel Rochon, the firm's managing partner, framed the outcome as reaching beyond the class members themselves: "The decision is an important victory not only for the Class Members, but for the integrity of Canadian capital markets. Mutual funds are a cornerstone of the retirement savings of millions of everyday Canadians, and investors are entitled to expect that fund managers will protect them from practices that unfairly dilute the value of their investments."
