Settlement Agreement: In the Matter of TD Waterhouse Investor Services, Inc. -
IN THE MATTER OF TD WATERHOUSE INVESTOR SERVICES, INC.
1. In this Settlement Agreement, capitalized terms not otherwise defined shall have the meanings ascribed to them in National Instrument 14-101 ("NI14-101"). The Staffs (the "Staffs" and individually, the "Staff") of the Securities Regulatory Authorities (collectively, the "Authorities" and individually, an "Authority") in each of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, Nova Scotia, New Brunswick, Newfoundland, Prince Edward Island and Yukon (the "Jurisdictions") and TD Waterhouse Investor Services, Inc. ("TD Waterhouse US") wish to enter into an agreement to settle certain issues outstanding between the Jurisdictions and TD Waterhouse US.
2. The Staff of the British Columbia Securities Commission has acted throughout on behalf of the Staffs of the Authorities with their knowledge and approval.
3. The Staffs of the Authorities agree to recommend the terms set out in this Settlement Agreement for approval pursuant to the required procedure in each Jurisdiction.
Agreed Statement of Facts
4. TD Waterhouse US acknowledges the following facts as correct:
4.1 TD Waterhouse US is a corporation organized under the Laws of New York. It is registered as a broker-dealer with the United States Securities and Exchange Commission and as a broker-dealer in all 50 states, the District of Columbia and Puerto Rico.
4.2 TD Waterhouse US operates a web-based Internet securities trading service from its offices located at 100 Wall Street, New York, New York. It is not, and has not been, registered to trade securities in any of the Jurisdictions.
4.3 TD Waterhouse US's website is accessible to residents in the Jurisdictions (the "Residents") via the Internet and the Residents could, prior to August, 2000, log onto the website and open an account with TD Waterhouse US (individually, an "Account" and collectively, the "Accounts") for the purpose of executing trades in U.S. securities over the Internet by completing an Account application form online and mailing a hard copy of the completed Account application form to TD Waterhouse US.
4.4 Since at least January, 1999, TD Waterhouse US has executed orders for U.S. securities that have been received from Residents having Accounts ("TD Waterhouse US Canadian Customers") without being registered as required in the Jurisdictions. The Securities Legislation requires a securities firm trading with residents of the Jurisdictions to be registered as a dealer in those Jurisdictions.
4.5 TD Waterhouse US hereby acknowledges that the Jurisdictions construe as trading in the Jurisdictions the execution of trades on behalf of Canadian residents in U.S. securities on U.S. markets.
5. The Staffs of the Authorities are not aware of any complaints made by TD Waterhouse US's Canadian Customers concerning the Accounts or their trading in the Accounts.
6. TD Waterhouse US represents that it immediately prohibited Residents from opening new accounts through its web-based service after receiving regulatory inquiries in August, 2000, regarding the fact that it was not registered in the Jurisdictions.
7. All Accounts other than Accounts maintained for individual tax-advantaged retirement savings plans located in the United States, were closed and transferred either to TD Waterhouse Investor Services (Canada) Inc. or in accordance with other instructions received from TD Waterhouse US Canadian Customers by December 18, 2000.
8. TD Waterhouse US undertakes and agrees to pay to the Jurisdictions in accordance with the attached Protocol the sum of Canada eight hundred thousand dollars ($800,000.00).
9. TD Waterhouse US waives any right it may have, under the Securities Legislation of the Jurisdictions, to a hearing, hearing and review, judicial review or appeal related to, in connection with, or incidental to this agreement.
10. If this Settlement Agreement is approved by an Authority, Staff of that Authority will not initiate any complaint to the Authority or request the Authority to hold a hearing or issue any order or take any other proceeding in respect of any conduct or alleged conduct of TD Waterhouse US or any of its affiliates or subsidiaries, their officers, directors, employees or agents, in relation to the facts set out in this Settlement Agreement.
Procedure for Approval of Settlement
11. If this Settlement Agreement is required to be approved by an Authority, it will constitute the entirety of the evidence to be submitted respecting TD Waterhouse US in this matter. Upon approval of the Settlement Agreement by the Authorities, TD Waterhouse US agrees to waive any right to a full hearing and appeal of this matter under the Securities Legislation of the Jurisdictions.
12. If this Settlement Agreement is approved by the Authorities, whether through hearing or otherwise, the parties to this Settlement Agreement will not make any statement that is inconsistent with this Settlement Agreement.
13. If for any reason whatsoever, this Settlement Agreement is not approved by any one or more of the Authorities:
13.1 this Settlement Agreement, including all discussions and negotiations leading up to its presentation at a hearing, and all negotiations between Staff and counsel for TD Waterhouse US concerning the matter of the terms of settlement proposed for TD Waterhouse US, shall be without prejudice to Staff and to TD Waterhouse US. Staff and TD Waterhouse US will be entitled to all available proceedings, remedies and challenges, including proceeding to a hearing of the allegations in the Notice of Hearing and Statement of Allegations, unaffected by this Settlement Agreement or the settlement negotiations;
13.2 the terms of this Settlement Agreement will not be referred to in any subsequent proceeding, or disclosed to any person, except with the written consent of Staff and TD Waterhouse US or as may be required by law; and
13.3 TD Waterhouse US agrees that it will not, in any proceeding, refer to or rely upon this Settlement Agreement or the negotiation or process of approval of this Settlement Agreement as the basis for any attack on the Authority's jurisdiction, alleged bias, appearance of bias, alleged unfairness or any other remedies or challenges that may otherwise be available.
14. Counsel for Staff or for TD Waterhouse US may refer to any part or all of the Settlement Agreement in the course of any hearing convened to consider the Settlement Agreement before any Authority. Otherwise, the Settlement Agreement and its terms will be treated as confidential by all parties to the Settlement Agreement until approved by all Authorities, and forever if, for any reason whatsoever, this Settlement Agreement is not approved by all of the Authorities.
15. Any obligation as to confidentiality shall terminate upon approval of this Settlement Agreement by all Authorities.
Execution of Settlement Agreement
16. This Settlement Agreement may be signed in one or more counterparts which together shall constitute a binding agreement and a facsimile copy of any signature shall be as effective as an original signature.
SIGNED at New York, New York, on June 15, 2001.
Authorized Signatory for TD Waterhouse US
Witness Name (please print)
100 Wall St.
NY, NY 10005
SIGNED at Vancouver, British Columbia, on June 18, 2001.
British Columbia Securities Commission
SIGNED at Toronto, Ontario, on June 18, 2001.
Director of Enforcement
Ontario Securities Commission
SIGNED at Calgary, Alberta, on June 15, 2001.
Director of Enforcement
Alberta Securities Commission
SIGNED at Montreal, Québec, on June 15, 2001.
Direction de la Conformité et de l'application
Commission des valeurs mobilières du Québec
SIGNED at Halifax, Nova Scotia, on June 18, 2001.
Nicholas A. Pittas
Director of Securities
Nova Scotia Securities Commission