In re BMO CAPITAL MARKETS

 
 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 102160 / January 13, 2025  
 
ADMINISTRATIVE PROCEEDING 
File No. 3-22398 
 
 
In the Matter of 
 
BMO CAPITAL MARKETS 
CORP. 
 
Respondent. 
 
 
ORDER INSTITUTING ADMINISTRATIVE 
PROCEEDINGS, PURSUANT TO SECTION 
15(b)(4) OF THE SECURITIES EXCHANGE 
ACT OF 1934, MAKING FINDINGS, AND 
IMPOSING REMEDIAL SANCTIONS 
   
 
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 
public interest that public administrative proceedings be, and hereby are, instituted pursuant to 
Section 15(b)(4) of the Securities Exchange Act of 1934 (“Exchange Act”) against BMO Capital 
Markets Corp. (“CMC” or “Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 
of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 
which the Commission is a party, and without admitting or denying the findings herein, except as 
to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 
admitted, Respondent consents to the entry of this Order Instituting Administrative Proceedings, 
Pursuant to Section 15(b)(4) of the Securities Exchange Act of 1934, Making Findings, and 
Imposing Remedial Sanctions (“Order”), as set forth below. 
 

 
 
 
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III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
 
Summary 
1. This matter involves CMC’s failure reasonably to supervise certain CMC registered 
representatives with a view towards preventing and detecting their violations of the federal 
securities laws while offering and selling certain Agency Collateralized Mortgage Obligation 
Bonds (“Agency CMO Bonds”).  
2. Agency CMO Bonds are a type of multi-class mortgage-backed security that are 
created by pooling residential mortgages into trusts and issuing bonds that pay a rate of return to 
investors based on principal and/or interest payments made on the mortgages. A CMO is typically 
created from a pool of mortgage loans that share common characteristics (i.e., interest rate or 
maturity), and then different tranches of securities (with different payment terms and risk profiles) 
are created and sold to customers as bonds. “Agency” CMO Bonds are issued by Fannie Mae, 
Freddie Mac, and Ginnie Mae. Agency CMO Bonds are considered relatively low-risk investments 
because of a full-faith guarantee of principal and interest to investors or other government support. 
From 2021 through 2022, Agency CMO Bond issuance exceeded $450 billion. 
3. The Agency CMO Bonds that are the subject of the Order are “Sliver Bonds” that 
were structured by certain CMC registered representatives who worked on the desk responsible for 
creating Agency CMOs (“Agency CMO Desk”) and were offered and sold by Agency CMO Desk 
members and other CMC registered representatives (together the “CMC Registered 
Representatives”) between December 2020 and May 2023 (“Relevant Period”). The Sliver Bonds 
are a subset of Agency CMO Bonds that were marketed and sold by CMC Registered 
Representatives in the Relevant Period. The Sliver Bonds, like other Agency CMO Bonds, were 
marketed using “Collateral Information” that certain members of the Agency CMO Desk (“Agency 
CMO Desk Members”) generated using the platform of a particular third-party service provider 
(“Data Provider A”), which published information that certain customers used in making 
purchasing decisions.  
4. A senior Agency CMO Desk Member who was primarily responsible for the 
structuring of new-issue Agency CMOs (“Agency CMO Desk Member 1”) discovered that the 
Sliver Bond structure could favorably alter the Collateral Information that Data Provider A 
published about the Sliver Bonds. Specifically, Agency CMO Desk Member 1 discovered that 
when millions of dollars of mortgages from lower-interest mortgage pools were combined with a 
tiny sliver – usually just $1,000 – of mortgages from higher-interest rate mortgage pools, the 
 
1
  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 
binding on any other person or entity in this or any other proceeding. 
 

 
 
 
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Collateral Information generated by Data Provider A would suggest the Sliver Bonds were backed 
by a large amount of the higher-interest rate mortgages.  
5. This structure altered the Collateral Information of the Sliver Bonds displayed in the 
systems of third-party market data providers used by some industry participants to analyze the 
bonds and impacted, among other things, the reported weighted average coupon, weighted average 
life, weighted average term to maturity, and geographic location of the mortgaged properties. The 
certificate rate of the Sliver Bonds was not affected by the structure. 
6. Agency CMO Desk Member 1 and a more junior member on the Agency CMO 
Desk who worked with Agency CMO Desk Member 1 (“Agency CMO Desk Member 2”) worked 
with a trader who supported the Agency CMO Desk (“Trader 1”) to sell certain of the Sliver Bonds. 
These Agency CMO Desk Members included the altered Collateral Information displayed in Data 
Provider A’s systems in written sales communications that were sent to CMC’s customers 
concerning the Sliver Bonds. And although these Agency CMO Desk Members provided 
additional information about the underlying collateral when requested, and they would explain why 
the Collateral Information used in their marketing communications was not consistent with the 
underlying collateral when asked, they did not affirmatively provide this information to all of 
CMC’s customers or with respect to each of the Sliver Bonds. In the Relevant Period, CMC 
Registered Representatives offered and sold more than $3 billion worth of Sliver Bonds.  
7. CMC failed to establish and implement supervisory procedures reasonably 
designed to prevent and detect the CMC Registered Representatives, subject to CMC’s 
supervision, from providing misleading information when offering and selling the Sliver Bonds to 
customers during the Relevant Period in violation of Section 17(a)(3) of the Securities Act of 1933 
(“Securities Act”). As a result, CMC failed reasonably to supervise its associated persons within 
the meaning of Section 15(b)(4)(E) of the Exchange Act.  
Respondent 
8. BMO Capital Markets Corp. is a Delaware corporation headquartered in New 
York, NY. CMC has been a registered broker-dealer since 1985 and registered investment adviser 
since 2012.  
Background on the Agency CMO Market 
9. Many Agency CMO Bond investors, or their brokers, have subscriptions to third-
party data services that analyze mortgage-backed securities and provide bond-level Collateral 
Information used to model, price and otherwise evaluate Agency CMO Bonds. The Collateral 
Information includes the bond’s weighted average net coupon for the underlying collateral (“Net 
WAC”), the weighted average mortgage interest rate paid by the mortgage borrowers (“Gross 
WAC”), the number of months until bond maturity, the weighted average loan age, the issuing 
agency, mortgage geography, the mortgages’ servicers, and whether the mortgages were part of a 

 
 
 
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special government program (e.g., VA or FHA loans). Agency CMO Bonds are backed by 
mortgage pools where each pool typically contains mortgages with similar features (such as loan 
age and interest rate). Data providers publish certain Collateral Information as a weighted average 
to provide information about the types of mortgages that are included in the pools.  
10. Collateral Information published by data providers also includes historical 
prepayment speeds, which provide information about the rate at which borrowers paid off pooled 
mortgage loans ahead of schedule in the past, and projected principal repayment speeds, which 
provide estimated information about the rate at which borrowers might pay off the pooled 
mortgage loans ahead of schedule in the future. Prepayment speeds are a material consideration for 
many investors when purchasing Agency CMO Bonds. Certain Agency CMO Bond investors 
consider “consensus” median prepayment speed projections (which are generated by third-party 
data providers based on information submitted from market participants) when formulating their 
own prepayment assumptions about Agency CMO Bonds.  
11. Agency CMO Bond purchasers may have specific preferences on what types of 
Agency CMO Bonds they would consider purchasing based on their market experience, existing 
mortgage-backed security portfolio and risk and return profile. Many Agency CMO Bond 
purchasers use Collateral Information to assist them in making purchasing decisions. Agency 
CMO Bond purchasers may use Collateral Information to screen Agency CMO Bonds as potential 
purchases, input certain published Collateral Information into models they use to evaluate 
projected Agency CMO Bond payment streams, or otherwise consider Collateral Information 
published by one or more third-party data providers when making their investment decisions. 
Certain of the Collateral Information used in making investment decisions is not available in the 
prospectus, while other information about the Agency CMO Bonds was available in the 
prospectus. Agency CMO Bond purchasers may also use modeling tools to analyze yield, 
valuations, and interest-rate risk, and evaluate a bond’s option-adjusted spread or option-adjusted 
duration. 
12. Agency CMO Bonds are often marketed prior to the publication of the prospectus 
and are marketed to customers using “offering sheets” prepared by the Agency CMO Desk 
Members. The offering sheets may include links to third-party data provider Collateral Information 
about the Agency CMO Bonds and also include some Collateral Information to help customers sort 
through the securities available for purchase and determine which ones to evaluate further. Agency 
CMO Desk Member 1, Agency CMO Desk Member 2 and Trader 1 understood that certain 
customers tended to use the information in these written communications and information 
available on third-party data provider systems to assist them in making purchasing decisions, and 
that such customers would not be interested or would be less interested in purchasing Agency 
CMO Bonds that were marketed with Collateral Information that they perceived as unfavorable.  
13. In the Relevant Period, interest rates rose significantly. Prepayments on Agency 
CMO Bond collateral declined at this time because of how prepayments are inversely correlated to 
interest rates. This impacted the market for Agency CMO Bonds in multiple ways. One impact was 

 
 
 
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that the price for certain bonds decreased. There were also certain investors in the Relevant Period 
that were not interested in purchasing Agency CMO Bonds backed by low weighted average 
coupon collateral.  
Certain Agency CMO Desk Members Structured Sliver Bonds to Generate Favorable 
Collateral Information Used to Market the Sliver Bonds 
14. In the Relevant Period, Agency CMO Desk Member 1 would discuss with certain 
Agency CMO Desk Members how structuring Sliver Bonds could increase the likelihood that they 
would be able to sell Agency CMO Bonds. 
15. For example, in one recorded call, Agency CMO Desk Member 1 and Agency 
CMO Desk Member 2 discussed structuring Sliver Bonds. Agency CMO Desk Member 1 told 
Agency CMO Desk Member 2: “...we have the data point that with a clean label, we haven’t been 
able to sell jack shit . . . whereas . . . when it’s shortened to a 4-year . . . we have like a bunch of [ ] 
regionals [ ] coming in and [ ] starting to take a look, right?” On that same call, Agency CMO Desk 
Member 1 also stated “we gotta make shit look cosmetically short...I think that’s paramount 
here...that’s what sells.”  
16. And in an instant message Agency CMO Desk Member 2 wrote to Trader 1: “I can 
use 1k of some pools to [change] cosmetics and can move all these [bonds.]”  
17. By combining multiple mortgage pools when creating the Sliver Bonds, the Agency 
CMO Desk Members were able to alter Collateral Information on Data Provider A’s systems that 
were used to market the Sliver Bonds.  
18. As one example, in November 2021, the Agency CMO Desk Members structured a 
Sliver Bond (“Bond X”) that was backed by two sets of mortgages. The overwhelming majority of 
the contributed collateral consisted of mortgage loans with a relatively low Gross WAC (relatively 
low interest rate collateral), but a relatively smaller subset of mortgage collateral backing Bond X 
consisted of higher Gross WAC (higher interest rate) mortgage loans. The first set was from 
approximately $77.5 million in mortgages that had a Gross WAC of 2.47%. This set made up 
approximately 99.99% of the collateral backing Bond X. The second subset was approximately 
$6,000 in mortgages that had a Gross WAC ranging from 3.90% to 5.43%. This set contributed 
less than 0.01% of the collateral backing Bond X. Because the pools of loans that the second subset 
of mortgages came from were much larger than the pools underlying the first set, and due to how 
Data Provider A calculated Agency CMO Bond Collateral Information, the displayed Gross WAC 
for Bond X was 3.96% – higher than the Gross WAC of the overwhelming majority of the 
underlying collateral.  
19. The figure below depicts the structure of Bond X: 

 
 
 
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20. Since Data Provider A’s methodology looks to the total size of each group of 
mortgages contributing to a bond – rather than to the actual contributions of each group – in 
weighting that group’s contribution to the bond, this structure had the effect of artificially 
increasing Bond X’s Gross WAC, making it appear that Bond X contained mortgages that were 
likely to pay more quickly than predicted by the consensus median prepayment speed projections 
displayed on Data Provider A’s systems.  
21. This structure also altered other Collateral Information about Bond X generated on 
Data Provider A’s systems, including, but not limited to, Bond X’s Net WAC, the underlying 
mortgages’ weighted average loan age and weighted average term to maturity, the geographic 
location of the underlying mortgages, the type and amount of special mortgage programs in the 
underlying loans (e.g., VA and FHA), the contribution amounts of the underlying mortgage pools, 
the bond’s historical prepayment speeds, and the underlying mortgages’ servicers. Other 
information on Data Provider A’s systems, such as option-adjust spread and option-adjusted 
duration, were not altered by the structure. 
22. Some Sliver Bonds may have prepaid close to, or faster than, the projected median 
principal prepayment speeds published on Data Provider A’s systems at the time of sale. In 
addition, some of these Sliver Bonds were illiquid, small-sized “odd lot” CMOs that traded at a 
discount. Nonetheless, the structure also altered historical prepayment speeds and other Collateral 
Information displayed and available in third-party data provider systems that certain of CMC’s 
customers may have used to make their own prepayment speed projections at the time of purchase. 

 
 
 
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CMC Registered Representatives Sent Materially Misleading Collateral Information  
Concerning Certain Sliver Bonds to Customers 
23. CMC Registered Representatives structured, offered and sold more than 400 Sliver 
Bonds that were marketed using Collateral Information that was altered or inflated by Agency 
CMO Desk Members. The Agency CMO Desk Members included altered Collateral Information 
for certain Sliver Bonds in offering sheets they prepared that were distributed to other CMC 
Registered Representatives and customers in an effort to offer and sell those bonds.  
24. For example, in September 2021, Agency CMO Desk Member 1 created and sent 
an offering sheet containing altered Collateral Information concerning “Bond Y,” another Sliver 
Bond, with the understanding that the information would be used to offer and sell Bond Y to 
customers. Certain of the Collateral Information was inflated because the offering sheet stated 
Bond Y had a Net WAC of 3.3% and a Gross WAC of 3.7%, when the overwhelming majority of 
the collateral underlying Bond Y had a Net WAC of 2.5% and a Gross WAC of 2.9%. 
25. Subsequently, a CMC Registered Representative sent a customer information about 
Bond Y, including a link to a Data Provider A analytics screen for the bond. This screen contained 
the altered Collateral Information for Bond Y, and the customer ultimately purchased several 
million dollars of Bond Y. 
26. And in June 2022, Agency CMO Desk Member 2 distributed to CMC sales team 
members an offering sheet including two different Sliver Bonds. The offering sheet included 
Collateral Information showing that both bonds had a Net WAC of 4.4% and a Gross WAC of 
5.1%, when the Net WAC and Gross WAC for a majority of the collateral underlying the bonds 
was 3.1% and 3.9%, respectively. A CMC Registered Representative offered the bonds to a 
customer and the customer ultimately purchased millions of dollars of each bond. 
27. Some of the Sliver Bonds may have ultimately prepaid close to or faster than 
certain of the Collateral Information displayed on Data Provider A’s systems predicted. 
Notwithstanding how the Sliver Bonds performed in hindsight, there were investors who may not 
have purchased the Sliver Bonds, or would have attempted to negotiate a lower price for the Sliver 
Bonds, had they received accurate information about the underlying collateral at the time of 
purchase. 
CMC Registered Representatives Received Complaints that the Collateral Information Used 
to Market Sliver Bonds Were Misleading or Not Reflective of Underlying Collateral 
 
28. Certain Agency CMO Desk Members received internal and external feedback that 
should have put them on notice that the Collateral Information used to market the Sliver Bonds 
was misleading.  

 
 
 
8 
29. For example, in June 2022, one market participant sent a message to Agency CMO 
Desk Member 1 stating that certain information about the collateral underlying certain “‘mixed 
collateral’ deals...needs to be disclosed better...” and that “on bonds like these are you [sic] not 
selling what is advertised.”  
30. Agency CMO Desk Member 1 sent a message in response stating Agency CMO 
Desk Member 1 “well understood” the market participant’s concerns regarding the Sliver Bonds, 
and stated that “all comments [were] taken to heart.” Agency CMO Desk Member 1 and other 
members of the Agency CMO Desk who learned of the feedback did not, however, escalate the 
market participant’s complaint to compliance or to more senior management. Certain Agency 
CMO Desk Members continued to structure and sell the Sliver Bonds using the altered Collateral 
Information. 
31. In addition, certain Agency CMO Desk Members had communications with other 
CMC Registered Representatives in which the Agency CMO Desk Members were asked why the 
Collateral Information they had provided in offering sheets did not match certain of the Sliver 
Bonds’ underlying collateral. In some communications, Agency CMO Desk Member 1 
acknowledged that this was because the Agency CMO Desk had used a blend for “cosmetics.” In 
at least one instance, Agency CMO Desk Member 1 told another CMC Registered Representative 
that they did have other “deals where [Collateral Information available on Data Provider A’s 
systems] matches actual blend” but stated that the pricing for those deals would be different. 
32. Although the CMC Registered Representatives’ conduct and marketing of the 
Sliver Bonds was misleading to certain market participants, there were also certain market 
participants that were able to figure out that the Collateral Information CMC included in its 
offering sheets was not reflective of the mortgages underlying the Sliver Bonds prior to purchase. 
In addition, there were other customers that asked follow-up questions about the Collateral 
Information or for further information about the loan pools prior to purchase, and at times, CMC 
Registered Representatives would provide those customers with additional information about the 
Sliver Bonds in response to those requests.  
CMC Failed Reasonably to Supervise CMC Registered Representatives 
 
33. CMC was responsible for supervising the CMC Registered Representatives in their 
offering and selling of Sliver Bonds. In the Relevant Period, the activities of CMC Registered 
Representatives were supervised by “desk principals.” CMC desk principals are first line 
supervisors, responsible for day-to-day supervision in line with CMC’s supervisory policies and 
procedures and they receive support from a Capital Markets Supervisor and additional oversight 
from the Compliance Department. In the Relevant Period, CMC’s supervisory policies and 
procedures were not reasonably designed or implemented with a view towards preventing and 
detecting the violations described above.  

 
 
 
9 
34. While CMC had established policies and procedures requiring that the “Agency 
CMO Desk Principal” perform certain specified supervisory functions, those procedures did not 
include guidance concerning the structure and sale of new-issue Agency CMO Bonds structured by 
the Agency CMO Desk. For example, CMC’s supervisory policies and procedures did not include 
any approval process before the new-issue Sliver Bonds could be offered and sold by CMC 
Registered Representatives.  
35. Moreover, although CMC’s policies and procedures prohibited registered 
representatives from sending external marketing communications that exaggerate or omit material 
facts that may cause marketing communications to be materially misleading in the Relevant Period 
and provided for a sample-based review of communications, CMC did not reasonably implement 
this requirement with respect to the marketing of the Sliver Bonds. For example, CMC lacked a 
process for reviewing the type of information shared with CMC’s customers about Agency CMO 
Bonds and lacked any process for reviewing the structures of Agency CMO Bonds offered to 
customers against the representations made about them in marketing communications.  
36. Furthermore, CMC had established policies and procedures that required that 
external communications be reviewed for potential misconduct and customer complaints, and that 
registered representatives escalate customer complaints for further review. While CMC had 
processes in place for selecting voice recordings and electronic communications for further review, 
those processes were not reasonably implemented to identify customers complaints or potential 
misrepresentations concerning Agency CMO Bonds. None of the contemporaneous 
communications described in the order concerning the Sliver Bonds were identified or flagged as 
part of routine surveillance. 
CMC’s Updates to its Supervisory Process 
 
37. CMC has since established additional supervisory policies and procedures 
concerning the offering and sale of Agency CMO Bonds after retaining an outside consultant that 
performed a review of CMC’s compliance and supervisory processes and made recommendations 
for improvement. Specifically, CMC has implemented a supervisory review process for the offer 
and sale of new-issue Agency CMO Bonds, including a pre-approval process for certain collateral 
blends and Gross WAC features, as well as quarterly meetings to discuss new Agency CMO 
structures. CMC has also updated its policies and procedures to standardize new-issue marketing 
information provided to customers. Further, CMC has implemented a monthly review of trade 
blotters with an emphasis on customer types, desk concentration, and revenues.  
38. CMC has also enhanced the lexicons it employs to monitor communications by 
registered representatives to detect potential misrepresentations concerning Agency CMO Bonds 
or potential customer complaints or dissatisfaction. In addition, CMC has implemented a new 
process for the Agency CMO Desk Members and Agency CMO Desk Principal to review the 
internally-calculated Gross WAC of new-issue CMOs against the Gross WAC displayed on the 
systems of various data services providers and flag significant discrepancies. CMC has also 

 
 
 
10 
updated its offering sheet templates to provide additional disclosures about the structure and 
collateral of blended Agency CMO Bonds marketed by CMC Registered Representatives.  
39. Finally, CMC has implemented enhanced scenario-based training for its registered 
representatives focused on novel bond structures and escalation of complaints and potential issues. 
Failure Reasonably to Supervise 
 
40. As a result of the conduct described above, CMC failed reasonably to supervise the 
CMC Registered Representatives within the meaning of Section 15(b)(4)(E) of the Exchange Act, 
with a view to preventing and detecting their conduct in violation of Securities Act Section 
17(a)(3) as described above. 
Disgorgement 
 
41. The disgorgement and prejudgment interest ordered in paragraph IV.B is consistent 
with equitable principles and does not exceed Respondent’s net profits from its violations, and will 
be distributed to harmed investors to the extent feasible. The Commission will hold funds paid 
pursuant to paragraph IV.B in an account at the United States Treasury pending distribution. Upon 
approval of the distribution final accounting by the Commission, any amounts remaining that are 
infeasible to return to investors, and any amounts returned to the Commission in the future that are 
infeasible to return to investors, may be transferred to the general fund of the U.S. Treasury, 
subject to Section 21F(g)(3) of the Exchange Act.   
Respondent’s Cooperation and Remedial Efforts 
In determining to accept the Offer, the Commission considered remedial acts promptly 
undertaken by Respondent and cooperation afforded the Commission staff.  
IV. 
 In view of the foregoing, the Commission deems it appropriate and in the public interest to 
impose the sanctions agreed to in Respondent’s Offer. 
 
 Accordingly, pursuant to Section 15(b) of the Exchange Act, it is hereby ORDERED that: 
 
A. Respondent is censured. 
B. Respondent shall, within 21 days of the entry of this Order, pay disgorgement of 
$19,417,908 and prejudgment interest of $2,241,507 to the Securities and Exchange Commission. 
If timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 
600. 

 
 
 
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C. Respondent shall, within 21 days of the entry of this Order, pay a civil money 
penalty in the amount of $19,000,000 to the Securities and Exchange Commission. If timely 
payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 
Payment must be made in one of the following ways:   
 
(1) Respondent may transmit payment electronically to the Commission, which 
will provide detailed ACH transfer/Fedwire instructions upon request;  
 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to:  
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK 73169 
 
Payments by check or money order must be accompanied by a cover letter identifying 
BMO Capital Markets Corp. as a Respondent in these proceedings, and the file number of these 
proceedings; a copy of the cover letter and check or money order must be sent to Armita Cohen, 
Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 
20549.   
 
D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 
for the disgorgement, prejudgment interest and penalties referenced in paragraphs IV.B and IV.C 
above. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 
as penalties paid to the government for all purposes, including all tax purposes. To preserve the 
deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 
not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 
compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 
Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 
Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 
Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an  
  

 
 
 
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additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 
damages action brought against Respondent by or on behalf of one or more investors based on 
substantially the same facts as alleged in the Order instituted by the Commission in this 
proceeding.  
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
        Secretary 
 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 102160 / January 13, 2025  

 

ADMINISTRATIVE PROCEEDING 

File No. 3-22398 

 

 

In the Matter of 

 

BMO CAPITAL MARKETS 

CORP. 

 

Respondent. 

 

 

ORDER INSTITUTING ADMINISTRATIVE 

PROCEEDINGS, PURSUANT TO SECTION 

15(b)(4) OF THE SECURITIES EXCHANGE 

ACT OF 1934, MAKING FINDINGS, AND 

IMPOSING REMEDIAL SANCTIONS 

   

 

I. 

 

 The Securities and Exchange Commission (“Commission”) deems it appropriate and in the 

public interest that public administrative proceedings be, and hereby are, instituted pursuant to 

Section 15(b)(4) of the Securities Exchange Act of 1934 (“Exchange Act”) against BMO Capital 

Markets Corp. (“CMC” or “Respondent”).  

 

II. 

 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the purpose 

of these proceedings and any other proceedings brought by or on behalf of the Commission, or to 

which the Commission is a party, and without admitting or denying the findings herein, except as 

to the Commission’s jurisdiction over it and the subject matter of these proceedings, which are 

admitted, Respondent consents to the entry of this Order Instituting Administrative Proceedings, 

Pursuant to Section 15(b)(4) of the Securities Exchange Act of 1934, Making Findings, and 

Imposing Remedial Sanctions (“Order”), as set forth below. 

 



 

 

 

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III. 

 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

 

Summary 

1. This matter involves CMC’s failure reasonably to supervise certain CMC registered 

representatives with a view towards preventing and detecting their violations of the federal 

securities laws while offering and selling certain Agency Collateralized Mortgage Obligation 

Bonds (“Agency CMO Bonds”).  

2. Agency CMO Bonds are a type of multi-class mortgage-backed security that are 

created by pooling residential mortgages into trusts and issuing bonds that pay a rate of return to 

investors based on principal and/or interest payments made on the mortgages. A CMO is typically 

created from a pool of mortgage loans that share common characteristics (i.e., interest rate or 

maturity), and then different tranches of securities (with different payment terms and risk profiles) 

are created and sold to customers as bonds. “Agency” CMO Bonds are issued by Fannie Mae, 

Freddie Mac, and Ginnie Mae. Agency CMO Bonds are considered relatively low-risk investments 

because of a full-faith guarantee of principal and interest to investors or other government support. 

From 2021 through 2022, Agency CMO Bond issuance exceeded $450 billion. 

3. The Agency CMO Bonds that are the subject of the Order are “Sliver Bonds” that 

were structured by certain CMC registered representatives who worked on the desk responsible for 

creating Agency CMOs (“Agency CMO Desk”) and were offered and sold by Agency CMO Desk 

members and other CMC registered representatives (together the “CMC Registered 

Representatives”) between December 2020 and May 2023 (“Relevant Period”). The Sliver Bonds 

are a subset of Agency CMO Bonds that were marketed and sold by CMC Registered 

Representatives in the Relevant Period. The Sliver Bonds, like other Agency CMO Bonds, were 

marketed using “Collateral Information” that certain members of the Agency CMO Desk (“Agency 

CMO Desk Members”) generated using the platform of a particular third-party service provider 

(“Data Provider A”), which published information that certain customers used in making 

purchasing decisions.  

4. A senior Agency CMO Desk Member who was primarily responsible for the 

structuring of new-issue Agency CMOs (“Agency CMO Desk Member 1”) discovered that the 

Sliver Bond structure could favorably alter the Collateral Information that Data Provider A 

published about the Sliver Bonds. Specifically, Agency CMO Desk Member 1 discovered that 

when millions of dollars of mortgages from lower-interest mortgage pools were combined with a 

tiny sliver – usually just $1,000 – of mortgages from higher-interest rate mortgage pools, the 

 
1  The findings herein are made pursuant to Respondent’s Offer of Settlement and are not 

binding on any other person or entity in this or any other proceeding. 

 



 

 

 

3 

Collateral Information generated by Data Provider A would suggest the Sliver Bonds were backed 

by a large amount of the higher-interest rate mortgages.  

5. This structure altered the Collateral Information of the Sliver Bonds displayed in the 

systems of third-party market data providers used by some industry participants to analyze the 

bonds and impacted, among other things, the reported weighted average coupon, weighted average 

life, weighted average term to maturity, and geographic location of the mortgaged properties. The 

certificate rate of the Sliver Bonds was not affected by the structure. 

6. Agency CMO Desk Member 1 and a more junior member on the Agency CMO 

Desk who worked with Agency CMO Desk Member 1 (“Agency CMO Desk Member 2”) worked 

with a trader who supported the Agency CMO Desk (“Trader 1”) to sell certain of the Sliver Bonds. 

These Agency CMO Desk Members included the altered Collateral Information displayed in Data 

Provider A’s systems in written sales communications that were sent to CMC’s customers 

concerning the Sliver Bonds. And although these Agency CMO Desk Members provided 

additional information about the underlying collateral when requested, and they would explain why 

the Collateral Information used in their marketing communications was not consistent with the 

underlying collateral when asked, they did not affirmatively provide this information to all of 

CMC’s customers or with respect to each of the Sliver Bonds. In the Relevant Period, CMC 

Registered Representatives offered and sold more than $3 billion worth of Sliver Bonds.  

7. CMC failed to establish and implement supervisory procedures reasonably 

designed to prevent and detect the CMC Registered Representatives, subject to CMC’s 

supervision, from providing misleading information when offering and selling the Sliver Bonds to 

customers during the Relevant Period in violation of Section 17(a)(3) of the Securities Act of 1933 

(“Securities Act”). As a result, CMC failed reasonably to supervise its associated persons within 

the meaning of Section 15(b)(4)(E) of the Exchange Act.  

Respondent 

8. BMO Capital Markets Corp. is a Delaware corporation headquartered in New 

York, NY. CMC has been a registered broker-dealer since 1985 and registered investment adviser 

since 2012.  

Background on the Agency CMO Market 

9. Many Agency CMO Bond investors, or their brokers, have subscriptions to third-

party data services that analyze mortgage-backed securities and provide bond-level Collateral 

Information used to model, price and otherwise evaluate Agency CMO Bonds. The Collateral 

Information includes the bond’s weighted average net coupon for the underlying collateral (“Net 

WAC”), the weighted average mortgage interest rate paid by the mortgage borrowers (“Gross 

WAC”), the number of months until bond maturity, the weighted average loan age, the issuing 

agency, mortgage geography, the mortgages’ servicers, and whether the mortgages were part of a 



 

 

 

4 

special government program (e.g., VA or FHA loans). Agency CMO Bonds are backed by 

mortgage pools where each pool typically contains mortgages with similar features (such as loan 

age and interest rate). Data providers publish certain Collateral Information as a weighted average 

to provide information about the types of mortgages that are included in the pools.  

10. Collateral Information published by data providers also includes historical 

prepayment speeds, which provide information about the rate at which borrowers paid off pooled 

mortgage loans ahead of schedule in the past, and projected principal repayment speeds, which 

provide estimated information about the rate at which borrowers might pay off the pooled 

mortgage loans ahead of schedule in the future. Prepayment speeds are a material consideration for 

many investors when purchasing Agency CMO Bonds. Certain Agency CMO Bond investors 

consider “consensus” median prepayment speed projections (which are generated by third-party 

data providers based on information submitted from market participants) when formulating their 

own prepayment assumptions about Agency CMO Bonds.  

11. Agency CMO Bond purchasers may have specific preferences on what types of 

Agency CMO Bonds they would consider purchasing based on their market experience, existing 

mortgage-backed security portfolio and risk and return profile. Many Agency CMO Bond 

purchasers use Collateral Information to assist them in making purchasing decisions. Agency 

CMO Bond purchasers may use Collateral Information to screen Agency CMO Bonds as potential 

purchases, input certain published Collateral Information into models they use to evaluate 

projected Agency CMO Bond payment streams, or otherwise consider Collateral Information 

published by one or more third-party data providers when making their investment decisions. 

Certain of the Collateral Information used in making investment decisions is not available in the 

prospectus, while other information about the Agency CMO Bonds was available in the 

prospectus. Agency CMO Bond purchasers may also use modeling tools to analyze yield, 

valuations, and interest-rate risk, and evaluate a bond’s option-adjusted spread or option-adjusted 

duration. 

12. Agency CMO Bonds are often marketed prior to the publication of the prospectus 

and are marketed to customers using “offering sheets” prepared by the Agency CMO Desk 

Members. The offering sheets may include links to third-party data provider Collateral Information 

about the Agency CMO Bonds and also include some Collateral Information to help customers sort 

through the securities available for purchase and determine which ones to evaluate further. Agency 

CMO Desk Member 1, Agency CMO Desk Member 2 and Trader 1 understood that certain 

customers tended to use the information in these written communications and information 

available on third-party data provider systems to assist them in making purchasing decisions, and 

that such customers would not be interested or would be less interested in purchasing Agency 

CMO Bonds that were marketed with Collateral Information that they perceived as unfavorable.  

13. In the Relevant Period, interest rates rose significantly. Prepayments on Agency 

CMO Bond collateral declined at this time because of how prepayments are inversely correlated to 

interest rates. This impacted the market for Agency CMO Bonds in multiple ways. One impact was 



 

 

 

5 

that the price for certain bonds decreased. There were also certain investors in the Relevant Period 

that were not interested in purchasing Agency CMO Bonds backed by low weighted average 

coupon collateral.  

Certain Agency CMO Desk Members Structured Sliver Bonds to Generate Favorable 

Collateral Information Used to Market the Sliver Bonds 

14. In the Relevant Period, Agency CMO Desk Member 1 would discuss with certain 

Agency CMO Desk Members how structuring Sliver Bonds could increase the likelihood that they 

would be able to sell Agency CMO Bonds. 

15. For example, in one recorded call, Agency CMO Desk Member 1 and Agency 

CMO Desk Member 2 discussed structuring Sliver Bonds. Agency CMO Desk Member 1 told 

Agency CMO Desk Member 2: “…we have the data point that with a clean label, we haven’t been 

able to sell jack shit . . . whereas . . . when it’s shortened to a 4-year . . . we have like a bunch of [ ] 

regionals [ ] coming in and [ ] starting to take a look, right?” On that same call, Agency CMO Desk 

Member 1 also stated “we gotta make shit look cosmetically short…I think that’s paramount 

here…that’s what sells.”  

16. And in an instant message Agency CMO Desk Member 2 wrote to Trader 1: “I can 

use 1k of some pools to [change] cosmetics and can move all these [bonds.]”  

17. By combining multiple mortgage pools when creating the Sliver Bonds, the Agency 

CMO Desk Members were able to alter Collateral Information on Data Provider A’s systems that 

were used to market the Sliver Bonds.  

18. As one example, in November 2021, the Agency CMO Desk Members structured a 

Sliver Bond (“Bond X”) that was backed by two sets of mortgages. The overwhelming majority of 

the contributed collateral consisted of mortgage loans with a relatively low Gross WAC (relatively 

low interest rate collateral), but a relatively smaller subset of mortgage collateral backing Bond X 

consisted of higher Gross WAC (higher interest rate) mortgage loans. The first set was from 

approximately $77.5 million in mortgages that had a Gross WAC of 2.47%. This set made up 

approximately 99.99% of the collateral backing Bond X. The second subset was approximately 

$6,000 in mortgages that had a Gross WAC ranging from 3.90% to 5.43%. This set contributed 

less than 0.01% of the collateral backing Bond X. Because the pools of loans that the second subset 

of mortgages came from were much larger than the pools underlying the first set, and due to how 

Data Provider A calculated Agency CMO Bond Collateral Information, the displayed Gross WAC 

for Bond X was 3.96% – higher than the Gross WAC of the overwhelming majority of the 

underlying collateral.  

19. The figure below depicts the structure of Bond X: 



 

 

 

6 

 
 

20. Since Data Provider A’s methodology looks to the total size of each group of 

mortgages contributing to a bond – rather than to the actual contributions of each group – in 

weighting that group’s contribution to the bond, this structure had the effect of artificially 

increasing Bond X’s Gross WAC, making it appear that Bond X contained mortgages that were 

likely to pay more quickly than predicted by the consensus median prepayment speed projections 

displayed on Data Provider A’s systems.  

21. This structure also altered other Collateral Information about Bond X generated on 

Data Provider A’s systems, including, but not limited to, Bond X’s Net WAC, the underlying 

mortgages’ weighted average loan age and weighted average term to maturity, the geographic 

location of the underlying mortgages, the type and amount of special mortgage programs in the 

underlying loans (e.g., VA and FHA), the contribution amounts of the underlying mortgage pools, 

the bond’s historical prepayment speeds, and the underlying mortgages’ servicers. Other 

information on Data Provider A’s systems, such as option-adjust spread and option-adjusted 

duration, were not altered by the structure. 

22. Some Sliver Bonds may have prepaid close to, or faster than, the projected median 

principal prepayment speeds published on Data Provider A’s systems at the time of sale. In 

addition, some of these Sliver Bonds were illiquid, small-sized “odd lot” CMOs that traded at a 

discount. Nonetheless, the structure also altered historical prepayment speeds and other Collateral 

Information displayed and available in third-party data provider systems that certain of CMC’s 

customers may have used to make their own prepayment speed projections at the time of purchase. 



 

 

 

7 

CMC Registered Representatives Sent Materially Misleading Collateral Information  

Concerning Certain Sliver Bonds to Customers 

23. CMC Registered Representatives structured, offered and sold more than 400 Sliver 

Bonds that were marketed using Collateral Information that was altered or inflated by Agency 

CMO Desk Members. The Agency CMO Desk Members included altered Collateral Information 

for certain Sliver Bonds in offering sheets they prepared that were distributed to other CMC 

Registered Representatives and customers in an effort to offer and sell those bonds.  

24. For example, in September 2021, Agency CMO Desk Member 1 created and sent 

an offering sheet containing altered Collateral Information concerning “Bond Y,” another Sliver 

Bond, with the understanding that the information would be used to offer and sell Bond Y to 

customers. Certain of the Collateral Information was inflated because the offering sheet stated 

Bond Y had a Net WAC of 3.3% and a Gross WAC of 3.7%, when the overwhelming majority of 

the collateral underlying Bond Y had a Net WAC of 2.5% and a Gross WAC of 2.9%. 

25. Subsequently, a CMC Registered Representative sent a customer information about 

Bond Y, including a link to a Data Provider A analytics screen for the bond. This screen contained 

the altered Collateral Information for Bond Y, and the customer ultimately purchased several 

million dollars of Bond Y. 

26. And in June 2022, Agency CMO Desk Member 2 distributed to CMC sales team 

members an offering sheet including two different Sliver Bonds. The offering sheet included 

Collateral Information showing that both bonds had a Net WAC of 4.4% and a Gross WAC of 

5.1%, when the Net WAC and Gross WAC for a majority of the collateral underlying the bonds 

was 3.1% and 3.9%, respectively. A CMC Registered Representative offered the bonds to a 

customer and the customer ultimately purchased millions of dollars of each bond. 

27. Some of the Sliver Bonds may have ultimately prepaid close to or faster than 

certain of the Collateral Information displayed on Data Provider A’s systems predicted. 

Notwithstanding how the Sliver Bonds performed in hindsight, there were investors who may not 

have purchased the Sliver Bonds, or would have attempted to negotiate a lower price for the Sliver 

Bonds, had they received accurate information about the underlying collateral at the time of 

purchase. 

CMC Registered Representatives Received Complaints that the Collateral Information Used 

to Market Sliver Bonds Were Misleading or Not Reflective of Underlying Collateral 

 

28. Certain Agency CMO Desk Members received internal and external feedback that 

should have put them on notice that the Collateral Information used to market the Sliver Bonds 

was misleading.  



 

 

 

8 

29. For example, in June 2022, one market participant sent a message to Agency CMO 

Desk Member 1 stating that certain information about the collateral underlying certain “‘mixed 

collateral’ deals…needs to be disclosed better…” and that “on bonds like these are you [sic] not 

selling what is advertised.”  

30. Agency CMO Desk Member 1 sent a message in response stating Agency CMO 

Desk Member 1 “well understood” the market participant’s concerns regarding the Sliver Bonds, 

and stated that “all comments [were] taken to heart.” Agency CMO Desk Member 1 and other 

members of the Agency CMO Desk who learned of the feedback did not, however, escalate the 

market participant’s complaint to compliance or to more senior management. Certain Agency 

CMO Desk Members continued to structure and sell the Sliver Bonds using the altered Collateral 

Information. 

31. In addition, certain Agency CMO Desk Members had communications with other 

CMC Registered Representatives in which the Agency CMO Desk Members were asked why the 

Collateral Information they had provided in offering sheets did not match certain of the Sliver 

Bonds’ underlying collateral. In some communications, Agency CMO Desk Member 1 

acknowledged that this was because the Agency CMO Desk had used a blend for “cosmetics.” In 

at least one instance, Agency CMO Desk Member 1 told another CMC Registered Representative 

that they did have other “deals where [Collateral Information available on Data Provider A’s 

systems] matches actual blend” but stated that the pricing for those deals would be different. 

32. Although the CMC Registered Representatives’ conduct and marketing of the 

Sliver Bonds was misleading to certain market participants, there were also certain market 

participants that were able to figure out that the Collateral Information CMC included in its 

offering sheets was not reflective of the mortgages underlying the Sliver Bonds prior to purchase. 

In addition, there were other customers that asked follow-up questions about the Collateral 

Information or for further information about the loan pools prior to purchase, and at times, CMC 

Registered Representatives would provide those customers with additional information about the 

Sliver Bonds in response to those requests.  

CMC Failed Reasonably to Supervise CMC Registered Representatives 

 

33. CMC was responsible for supervising the CMC Registered Representatives in their 

offering and selling of Sliver Bonds. In the Relevant Period, the activities of CMC Registered 

Representatives were supervised by “desk principals.” CMC desk principals are first line 

supervisors, responsible for day-to-day supervision in line with CMC’s supervisory policies and 

procedures and they receive support from a Capital Markets Supervisor and additional oversight 

from the Compliance Department. In the Relevant Period, CMC’s supervisory policies and 

procedures were not reasonably designed or implemented with a view towards preventing and 

detecting the violations described above.  



 

 

 

9 

34. While CMC had established policies and procedures requiring that the “Agency 

CMO Desk Principal” perform certain specified supervisory functions, those procedures did not 

include guidance concerning the structure and sale of new-issue Agency CMO Bonds structured by 

the Agency CMO Desk. For example, CMC’s supervisory policies and procedures did not include 

any approval process before the new-issue Sliver Bonds could be offered and sold by CMC 

Registered Representatives.  

35. Moreover, although CMC’s policies and procedures prohibited registered 

representatives from sending external marketing communications that exaggerate or omit material 

facts that may cause marketing communications to be materially misleading in the Relevant Period 

and provided for a sample-based review of communications, CMC did not reasonably implement 

this requirement with respect to the marketing of the Sliver Bonds. For example, CMC lacked a 

process for reviewing the type of information shared with CMC’s customers about Agency CMO 

Bonds and lacked any process for reviewing the structures of Agency CMO Bonds offered to 

customers against the representations made about them in marketing communications.  

36. Furthermore, CMC had established policies and procedures that required that 

external communications be reviewed for potential misconduct and customer complaints, and that 

registered representatives escalate customer complaints for further review. While CMC had 

processes in place for selecting voice recordings and electronic communications for further review, 

those processes were not reasonably implemented to identify customers complaints or potential 

misrepresentations concerning Agency CMO Bonds. None of the contemporaneous 

communications described in the order concerning the Sliver Bonds were identified or flagged as 

part of routine surveillance. 

CMC’s Updates to its Supervisory Process 

 

37. CMC has since established additional supervisory policies and procedures 

concerning the offering and sale of Agency CMO Bonds after retaining an outside consultant that 

performed a review of CMC’s compliance and supervisory processes and made recommendations 

for improvement. Specifically, CMC has implemented a supervisory review process for the offer 

and sale of new-issue Agency CMO Bonds, including a pre-approval process for certain collateral 

blends and Gross WAC features, as well as quarterly meetings to discuss new Agency CMO 

structures. CMC has also updated its policies and procedures to standardize new-issue marketing 

information provided to customers. Further, CMC has implemented a monthly review of trade 

blotters with an emphasis on customer types, desk concentration, and revenues.  

38. CMC has also enhanced the lexicons it employs to monitor communications by 

registered representatives to detect potential misrepresentations concerning Agency CMO Bonds 

or potential customer complaints or dissatisfaction. In addition, CMC has implemented a new 

process for the Agency CMO Desk Members and Agency CMO Desk Principal to review the 

internally-calculated Gross WAC of new-issue CMOs against the Gross WAC displayed on the 

systems of various data services providers and flag significant discrepancies. CMC has also 



 

 

 

10 

updated its offering sheet templates to provide additional disclosures about the structure and 

collateral of blended Agency CMO Bonds marketed by CMC Registered Representatives.  

39. Finally, CMC has implemented enhanced scenario-based training for its registered 

representatives focused on novel bond structures and escalation of complaints and potential issues. 

Failure Reasonably to Supervise 

 

40. As a result of the conduct described above, CMC failed reasonably to supervise the 

CMC Registered Representatives within the meaning of Section 15(b)(4)(E) of the Exchange Act, 

with a view to preventing and detecting their conduct in violation of Securities Act Section 

17(a)(3) as described above. 

Disgorgement 

 

41. The disgorgement and prejudgment interest ordered in paragraph IV.B is consistent 

with equitable principles and does not exceed Respondent’s net profits from its violations, and will 

be distributed to harmed investors to the extent feasible. The Commission will hold funds paid 

pursuant to paragraph IV.B in an account at the United States Treasury pending distribution. Upon 

approval of the distribution final accounting by the Commission, any amounts remaining that are 

infeasible to return to investors, and any amounts returned to the Commission in the future that are 

infeasible to return to investors, may be transferred to the general fund of the U.S. Treasury, 

subject to Section 21F(g)(3) of the Exchange Act.   

Respondent’s Cooperation and Remedial Efforts 

In determining to accept the Offer, the Commission considered remedial acts promptly 

undertaken by Respondent and cooperation afforded the Commission staff.  

IV. 

 In view of the foregoing, the Commission deems it appropriate and in the public interest to 

impose the sanctions agreed to in Respondent’s Offer. 

 

 Accordingly, pursuant to Section 15(b) of the Exchange Act, it is hereby ORDERED that: 

 

A. Respondent is censured. 

B. Respondent shall, within 21 days of the entry of this Order, pay disgorgement of 

$19,417,908 and prejudgment interest of $2,241,507 to the Securities and Exchange Commission. 

If timely payment is not made, additional interest shall accrue pursuant to SEC Rule of Practice 

600. 



 

 

 

11 

C. Respondent shall, within 21 days of the entry of this Order, pay a civil money 

penalty in the amount of $19,000,000 to the Securities and Exchange Commission. If timely 

payment is not made, additional interest shall accrue pursuant to 31 U.S.C. § 3717. 

Payment must be made in one of the following ways:   

 

(1) Respondent may transmit payment electronically to the Commission, which 

will provide detailed ACH transfer/Fedwire instructions upon request;  

 

(2) Respondent may make direct payment from a bank account via Pay.gov 

through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

 

(3) Respondent may pay by certified check, bank cashier’s check, or United 

States postal money order, made payable to the Securities and Exchange 

Commission and hand-delivered or mailed to:  

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK 73169 

 

Payments by check or money order must be accompanied by a cover letter identifying 

BMO Capital Markets Corp. as a Respondent in these proceedings, and the file number of these 

proceedings; a copy of the cover letter and check or money order must be sent to Armita Cohen, 

Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 

20549.   

 

D. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair Fund is created 

for the disgorgement, prejudgment interest and penalties referenced in paragraphs IV.B and IV.C 

above. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated 

as penalties paid to the government for all purposes, including all tax purposes. To preserve the 

deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 

not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action (“Penalty Offset”). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 

Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an  

  

http://www.sec.gov/about/offices/ofm.htm


 

 

 

12 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a “Related Investor Action” means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this 

proceeding.  

 

 By the Commission. 

 

 

 

Vanessa A. Countryman 

        Secretary