The Ontario Securities Commission imposed a fine of $3.3 million Wednesday on investment bank BMO Nesbitt Burns for its involvement in the initial public offering of FMF Capital in 2005.

Units in FMF, a sub-prime mortgage firm, came onto the market at $10 each as part of a $197.5-million offering. But by eight months later, the price of the income trust units had fallen to less than one dollar after the company suspended its monthly cash distribution.

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BMO Nesbitt Burns, a unit of the Bank of Montreal, says it 'accepts some aspects of its conduct were not consistent with reasonable underwriting practices.' ((Terry Reith/CBC))

FMF stock was delisted in 2007.

Investors said they had been misled.

The OSC found that BMO, the lead underwriter of the public offering, "engaged in conduct contrary to the public interest by conducting due diligence in respect of the FMF offering in a manner that did not comply with reasonable underwriting practices."

Due diligence refers to properly evaluating a company to determine its net worth.

In its agreement with the OSC, BMO Nesbitt Burns said it "accepts some aspects of its conduct were not consistent with reasonable underwriting practices."

BMO Nesbitt Burns, a division of the Bank of Montreal, collected $4.41 million in fees for leading the sale. It has also paid $1.75 million toward the settlement of three class-action lawsuits by investors related to the IPO.

With files from The Canadian Press