A hearing panel of the Ontario Regional Council of the Mutual Fund Dealers Association today accepted a settlement agreement negotiated between MFDA staff and Investors Group Financial Services Inc. (IGFS) as part of the market timing probe.

It was the MFDA’s first-every disciplinary hearing.

IGFS acknowledged that from October 2000 to November 2002 it was involved in the negotiation and management of an agreement that allowed one institutional market timing client to engage in frequent trading market timing in IG mutual funds. The agreement protected the relevant funds from some, but not all, of the costs to those funds of the frequent trading. The MDFA noted that there was no public disclosure of this agreement.

As part of the settlement, IGFS agreed to compensate the investors affected by its conduct by making a $2.65 million payment through an agreed upon distribution mechanism. It will also pay a fine to the MFDA in the amount of $2.65 million. In addition, within six months IGFS will implement additional procedures for reporting to its board of directors on the status of the firm’s compliance with MFDA rules. The firm will pay costs of the MFDA investigation in the amount of $50,000.

The MFDA said that the market timing client achieved a return on its overall investment in the affected funds that was significantly higher than the return that long term investors would have achieved on their investments in the funds in the same period. In permitting the trading and failing to implement appropriate measures to protect the funds from associated harm, the firm acted contrary to the public interest, the MFDA said.