Toronto-Dominion Bank is speeding up the appointment of its new chief executive and has made sweeping changes to its board, just a few months after regulators in the United States levied sanctions against the lender for failing to monitor money laundering activities at its branches.

Raymond Chun, currently chief operating officer at TD, will now succeed Bharat Masrani as CEO on Feb. 1 instead of April 10, as previously planned.

“Ray has moved quickly and decisively to launch a review of our strategy, operations and investments, and has engaged with customers, clients and colleagues across the bank,” Alan MacGibbon, TD’s chair, said in a statement. “We are excited to have Ray take the helm and lead TD into the future.”

The bank also said MacGibbon will step down as chair and retire as a TD director by year-end.

In addition, the board amended its corporate governance guidelines to reduce the discretionary director term extension to two years from five years after an initial 10-year term. As a result, five TD board members will leave.

Amy Brinkley, Colleen Goggins and Karen Maidment will retire from the board at the annual general meeting on April 10, while Claude Mongeau and Brian Ferguson have elected not to seek an extension under the new policy and will also retire at the AGM.

TD said four “highly qualified leaders with experience in global banking, governance, risk management, and regulatory compliance” will stand for election.

They include Elio Luongo, former chief executive of KPMG Canada; Nathalie Palladitcheff, the first female CEO of Ivanhoé Cambridge Inc.; Frank Pearn, former global chief compliance officer and operational risk executive at JPMorgan Chase & Co.; and Paul Wirth, former deputy chief financial officer, global controller and chief accounting officer at Morgan Stanley.

“We are pleased to have attracted highly experienced leaders with global perspective and diverse skills to the board,” MacGibbon said.

Jefferies Inc. analyst John Aiken viewed the changes as a positive.

“Ray Chun will be getting the keys to the bank sooner … while the board of directors gets an injection of fresh blood,” he said in a note on Friday. “We view these announcements positively as it infers that TD’s remediation path will remain a big push and could spell some relief for investors.”

He said he will look out for changes at other banks’ boards, as “risk management and compliance become the number one issue at the top of the house.”

TD was fined about US$3.1 billion and ordered to cap the expansion of its U.S. retail banking business in October by the U.S. Department of Justice and other regulators for failing to monitor money laundering activities at its branches. The fine was expected — TD had kept aside the money beforehand — but the cap took some by surprise.

In December, TD suspended its medium-term financial targets and decided to conduct a review of its strategies, which would make it “challenging” to generate earnings growth, the bank said. It suspended its targets of seven per cent to 10 per cent earnings per share growth and 16 per cent return on equity. It will provide new targets in the second half of 2025.

As a result of its failure to prevent money laundering and the resulting sanctions, 41 TD executives, including many who are no longer with the bank, had their “variable compensation” reduced by a total of $30 million, the bank said.

Masrani did not receive any “cash incentive award or equity compensation” for 2024, resulting in his compensation being reduced by 89 per cent — to $1.5 million from $13.2 million.

Bank of America Corp. on Friday upgraded its rating on TD to buy from neutral because it thinks Chun can fix the bank’s anti-money laundering issues.

“Our management meeting with CEO Ray Chun on Tuesday increased our confidence that the new leadership appreciates the frustration among shareholders tied to management execution and the poor messaging to the Street around management’s strategy,” analyst Ebrahim Poonawala said in a note.

He said the Bank of America was initially skeptical about the announcement of Chun’s appointment last year, but “our discussion with Chun and his messaging starting with (Q4 2024) earnings has eliminated this concern and we are now more inclined to see him as an internal activist.”

TD shares on the Toronto Stock Exchange rose 4.5 per cent on Friday as of 12:45 p.m. eastern.

• Email: nkarim@postmedia.com

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