The Investment Dealers Association of Canada announced today that BMO Nesbitt Burns Inc. has agreed to pay a fine of $450,000 for failing to properly supervise registered representative Zona Armstrong.

Nesbitt permitted Armstrong to price certain U.S. convertible debentures at month end for the purpose of her clients’ month-end statements in contravention of Nesbitt’s own internal firm policies.

Without adequate internal controls in place, Armstrong was able to set inflated prices for the securities in question. This ultimately led to numerous client complaints and claims for compensation. As of May 1, 2002, Nesbitt had received 157 complaints from Armstrong’s clients and had paid over $10 million in compensation to 131 clients.

Pursuant to a settlement approved by the Ontario District Council of the IDA on July 23, Nesbitt admitted that its risk management department was aware of, and acquiesced in, the circumvention of internal policies by Armstrong.

The brokerage firm also admitted that it failed to maintain an adequate supervisory environment at the head office level, and that it failed to maintain adequate supervision at the branch level.

“The severity of the penalty reflects the serious nature of these infractions. We require effective supervision at member firms and expect full compliance with association rules and policies”, said Alex Popovic, IDA vice president, Enforcement, in a news release.

The prosecution of Armstrong for her own actions, which at this time are allegations only and remain to be proven before the Alberta District Council, is pending.

Nesbitt has agreed to pay the costs of investigation and prosecution of $50,000. In addition, within 30 days, the firm must submit to the IDA for review and approval its internal policies and procedures relative to the pricing of corporate securities for sale to its clients.