A trio of U.S. online brokers have agreed to pay Canadian securities regulators more than C$2 million after being found to accept and execute trades or orders on behalf of Canadian clients.

The three brokers, Datek Online Brokerage Services LLC, Ameritrade Inc., and TD Waterhouse Investor Services (US) have admitted 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,” says 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, says Hyndman. “It 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 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.