TORONTO – The Supreme Court of Canada has dismissed an appeal by CIBC, allowing a class-action lawsuit brought by shareholders against the bank to proceed to trial.
The bank is alleged to have failed to adequately disclose its exposure to the U.S. subprime market.
“The bank now has to face the music, and we can move forward with this case on the merits,” said Joel Rochon, the lawyer representing the shareholders.
The case will be heard in the Ontario Superior Court of Justice in Toronto. Rochon said he expects the trial to begin some time in the next 12 to 18 months.
Canadian Imperial Bank of Commerce (TSX:CM) has said it would defend itself “vigorously” against the allegations, which have not been proven in court.
CIBC’s appeal had argued that the limitation period for the statutory action had expired under the terms of the Ontario Securities Act.
“This is truly positive news for Canadian shareholders, because we now have a clear and effective remedy to pursue corporations, including banks, where there have been material misrepresentations made to the marketplace,” Rochon said.
“It’s cases like these that need to be pursued, and the court has made it possible for shareholders to advance these cases, and to advance them effectively.”
CIBC said it is disappointed in the ruling, but added the decision was a procedural one that would determine whether the case can proceed as a class-action.
“We continue to believe that CIBC’s conduct was appropriate and that our disclosure met applicable requirements,” spokesman Kevin Dove said in an email.
The case alleges that the bank had an $11.5 billion exposure to the U.S. subprime real estate market that it did not properly disclose to shareholders.
The subsequent disclosure of this exposure caused massive losses to shareholders of more than $4 billion, they contend.
The subprime market involved mortgage-backed securities that offered attractive rates of return due to higher interest on the mortgages, but the lower credit quality eventually produced massive defaults.
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