A hearing panel of the Mutual Fund Dealers Association of Canada has approved a proposed settlement with Berkshire Investment Group Inc. over the dealer’s role in the Ian Thow case.

Under the terms of the settlement, the panel imposed a fine of $500,000 on Berkshire and required it to pay $50,000 towards the cost of the investigation and the hearing. At a previous settlement hearing held on October 22, the panel declined to approve a proposed settlement agreement.

The settlement concerns Berkshire’s failure to conduct reasonable supervisory investigations between September 16, 2004 and June 1, 2005 in response to reports it received from two individuals concerning the activities of one of its mutual fund salespersons, Ian Thow. “Over a period of several years, Thow persuaded numerous individuals, including clients of Berkshire, to provide him with money that he promised to invest on their behalf but instead used for his personal benefit,” the MFDA said.

The British Columbia Securities Commission conducted enforcement proceedings against Thow, and recently found that he had failed to deal fairly, honestly and in good faith with clients, made misrepresentations and perpetrated a fraud. The MFDA notes that Thow is also the subject of a criminal investigation by the RCMP in Vancouver.

“Although Berkshire was not aware of Thow’s fraudulent activities, Berkshire acknowledged in the settlement agreement that it did not take reasonable supervisory and disciplinary measures after it received the reports from the two individuals,” the regulator said. “Berkshire further acknowledged that, had it taken those measures, it is more likely that Thow’s activities would have been discovered and brought to an end. Instead, Thow was able to continue to persuade individuals to provide him with an additional $6.3 million, almost $4.5 million of which was received from clients of Berkshire.”

The hearing panel accepted that Berkshire’s failure to conduct reasonable supervisory investigations in response to the two reports was not the result of a systemic failure on its part or intentional misconduct. It also noted that Berkshire has “paid substantial amounts” to compensate some of the individuals who provided money to Thow.