An Investment Industry Regulatory Organization of Canada (IIROC) hearing panel today accepted a settlement with TD Waterhouse Canada Inc. in which the investment firm will pay a $2 million fine, as well as procedural costs in the amount of $50,000 for its failure to ensure clients buying hedge funds were in fact accredited investors.

As part of the settlement, TD Waterhouse admitted:

> between 2001 and 2005 it sold retail clients Olympus funds without confirming that those clients were accredited investors; and

> between 2001 and 2004, it lacked an effective review or approval procedure for alternative investments such as hedge funds, nor was it able to provide training and guidance to its staff to guarantee that a hedge fund was the right product for the client 2001 to 2005.

The settlement is the culmination of an Investment Dealers Association of Canada (IDA) investigation dating back to April 2006, when TD Waterhouse was an IDA member. IIROC was born this year in from the merger of the IDA and Market Regulation Services Inc.

In the meantime, when TD Waterhouse discovered that unqualified investors had been allowed to buy the Olympus funds, at the time, it restituted those clients to the tune of nearly $2 million.

“A number of new procedures and systems were in place at TD Waterhouse prior to and outside of the investigation being opened in 2006” explains TD spokesperson Susan Webb. “We have confidence in our procedures and systems with respect to the sale of exempt market securities and the review and approval of new alternative investments.”

The settlement agreement is available on the IIROC Web site.