U.S. online brokers agree to abide by Canadian rules [CSA]
June 19, 2001 For Immediate ReleaseVancouver -- A trio of U.S. online brokers have agreed to pay Canadian securities regulators more than $2 million (Cdn) resulting from accepting and executing trades or orders on behalf of Canadian clients.
The three brokers, Datek Online Brokerage Services LLC, Ameritrade Inc., and TD Waterhouse Investor Services (US) admit they were not registered in Canada to execute trades or orders for Canadian residents. Securities legislation in each province requires that a dealer be registered before it can trade. Each has agreed to pay $800,000.
As part of the settlement with Canadian regulators, Datek and Ameritrade agreed to seek registration in the Canadian provinces and territories in which they have clients. In return, the companies have been granted exemptions to continue making trades on behalf of existing clients until September 30, 2001, providing they otherwise comply with the regulations.
TD Waterhouse (US) has transferred its Canadian clients to TD Waterhouse (Canada) as of December 18, 2000.
"This agreement provides protection for Canadian investors while allowing the marketplace to continue functioning in an open and competitive manner," said Doug Hyndman, chair of the Canadian Securities Administrators, the umbrella organization for Canada's 13 provincial and territorial securities commissions.
“This is the first ever CSA co-ordinated settlement negotiated on behalf of all affected CSA jurisdictions at one time.
"The U.S. dealers’ agreement to seek Canadian registration reaffirms the Canadian regulatory structure and will ensure that Canadian clients receive the full protection to which they are entitled. These protections are similar to those provided by other Canadian discount brokers.”
Under both Canadian and U.S. securities regulations, anyone trading securities or advising clients about securities must be registered (licensed) with securities regulators in the province, territory or state where the trading occurs. Trading is considered to have occurred in both jurisdictions if a trade is ordered in one jurisdiction and executed in another.
Dealer registration ensures that basic standards such as educational qualifications and minimum capital requirements are met. Registration allows regulators to monitor investment dealers and provide investors with assistance in the event of broker misconduct. Registered Canadian investment dealers are also members of the Canadian Investor Protection Fund. This fund covers clients for up to $1 million per account in losses resulting from an investment dealer's bankruptcy.
· The Canadian Securities Administrators is an umbrella group made up of all 13 provincial and territorial securities regulators. · Anyone trading in securities or advising clients in securities is required to be registered (or licensed) in the jurisdiction where the trading occurs.
· Registration requires individuals have a certain level of educational qualifications and that firms maintain sufficient operating capital.
· Registration allows regulators to monitor investment dealers and provide investors an avenue of complaint in the event of broker misconduct.
· U.S. securities regulations require registration in any state where trading occurs.
· Canadian regulations require registration in any province or territory where trading occurs.
· In instances where a trade is ordered in one jurisdiction and executed in another, securities regulations consider the trade to have occurred in both jurisdictions.
The issue: U.S. online brokers have executed trades or orders in securities on behalf of Canadian clients without Canadian registration.
The problem: The U.S. brokers are not registered in the Canadian jurisdictions in which they have been doing business.
Possible consequences: The normal investor protection facilities of the Investment Dealers Association of Canada are not available to the Canadian clients of these firms. Specifically, it is questionable whether Canadians making trades through these brokers are covered by any investor protection funds.
Solution: U.S. brokers have agreed to seek registration in all Canadian jurisdictions in which they have clients and to pay $800,000 each.
Media Relations Officer
BC Securities Commission
Director of Communications
Ontario Securities Commission
Manager of Public Relations
Quebec Securities Commission (CVMQ) (514) 940-2199 (ext. 4441)
Alberta Securities Commission
Education and Information Coordinator
Manitoba Securities Commission
|Nicholas A. Pittas,|
Director of Securities
Nova Scotia Securities Commission