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TD Waterhouse Fined $2 Million for Illegal Sale of Hedge Funds

New York (HedgeCo.Net) – TD Waterhouse has been ordered to pay a $2 million fine as a result of selling hedge funds to clients who were not accredited, according to a report by the Vancouver Sun.

The Investment Industry Regulatory Organization of Canada claimed that TD “failed to establish and maintain alternative investment review or approval procedures,” while failing to “ensure that the purchase of hedge funds were appropriate for its clients.” 

The Olympus hedge funds were sold from 2001-2005 and were the subject of complaints from 31 TD Waterhouse clients.  Their chief problem with the funds was that they were portrayed as a safe, low risk investment.   

Hedge funds, while they may enjoy lighter regulation than most traditional investments, must adhere to strict guidelines when it comes to who may invest in them.  Because hedge funds are thought to carry most risk than other investment vehicles, the investor must possess the status of being “accredited.”  Since accredited investors are thought to be sophisticated and educated in the realm of investing, hedge funds can therefore enjoy the benefits of lighter regulation.

According to Alex Popovic, Vice President of Enforcement at IIROC, the fine was reduced because of TD’s willingness to cooperate and a number of things they implemented internally to help correct the problem.  These include new training programs and controls, as well as the discipline of brokers who sold the funds to unqualified clients. 

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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