Investors launched the lawsuit in 2008, alleging that the bank had not only misled the market about the size of its exposure to the US subprime market, but also the volatility of the associated investments.
CIBC spokeswoman Nima Ranawana said in a statement that the bank had reached a settlement without any admission of liability or wrongdoing, and the plaintiffs’ claims had still not been proven.
“While we believed CIBC’s disclosure was appropriate and met all applicable requirements, we made a deal to avoid further legal fees and put the case behind us. “
The bank lost an appeal to the Supreme Court of Canada in 2015, paving the way for the case to move forward, but the settlement was reached before the case went to trial.
“It was an extremely long battle, until the Supreme Court, and back, on the verge of trial,” said Joel Rochon, managing partner of the Rochon Genova cabinet who handled the case.
The lawsuit aimed to recover nearly $ 4 billion in damages as part of its claim that the bank had failed to properly disclose $ 11.5 billion of exposure to the subprime market.
Rochon said that although there was a compromise on both sides following intense negotiations, he was satisfied with the outcome which brings meaningful restitution to the members of the group and is one of the most important such settlements. in Canada.
“This goes to some extent in ensuring accountability to shareholders in terms of the disclosure requirements of banks and other financial institutions. “
The subprime market involved mortgage-backed securities that offered attractive rates of return due to higher mortgage interest, but the lower credit quality ultimately produced massive defaults.
The collapse of the US residential mortgage-backed securities market was a key contributor to the financial crisis.
Under the settlement, investors who purchased shares of CIBC between May 31, 2007 and February 28, 2008 may be entitled to payment.
The agreement has yet to be approved by the Ontario Superior Court of Justice. A hearing has been set for January 12.
This report by The Canadian Press was first published on December 7, 2021.
Companies in this story: (TSX: CM)
Ian Bickis, The Canadian Press