BMO Nesbitt Burns Inc. has agreed to pay a fine of $250,000 to the Investment Industry Regulatory Organization of Canada, after admitting that it breached Universal Market Integrity Rules when it failed to make reasonable efforts to meet its best price obligations.

On Aug. 16, an IIROC hearing panel approved a settlement agreement with BMO Nesbitt Burns.

The firm admitted that between October 2008 and October 2009, it failed to make reasonable efforts to connect to the Omega ATS protected marketplace.

Under UMIR 5.2, the best price obligation is a general duty owed to the market to ensure that better priced orders are not bypassed and traded through. Its objective is to ensure fairness to all market participants, and to promote efficiency and transparency while maintaining investor confidence in the market.

UMIR Policy 5.2 requires IIROC-regulated firms to adopt policies and procedures that will ensure compliance with their best price obligations. Firms must also update these policies to reflect changes in the trading environment and market structure.

BMO Nesbitt Burns received two warnings from IIROC in December 2008 and February 2009 that it was responsible for a larger-than-average number of “trade through” alerts, which identify possible violations where investors’ orders were not executed at the best price. But the firm failed to respond in a timely manner, according to IIROC.

The regulator acknowledged that BMO Nesbitt Burns took some steps to establish connectivity to Omega ATS in the relevant period, but said the firm failed to meet the reasonable efforts requirement.

The firm did not sign subscription agreement with Omega until October 14, 2009, and subsequently connected to the marketplace.

Under the settlement agreement, BMO Nesbitt Burns has agreed to pay a fine of $250,000 and costs of $15,000.

IE