Bank of Montreal to pay regulatory settlement

TORONTO, May 15 (Reuters) - Bank of Montreal (BMO.TO) said on Friday it has reached a settlement agreement with Canada's securities industry watchdog after inadvertently breaching minimum levels of risk adjusted capital.

The BMO Nesbitt Burns settlement is scheduled to go before a panel of the Investment Industry Regulatory Organization of Canada (IIROC) on May 22 and follows an investigation launched in November 2008.

IIROC said in a statement on Friday that BMO Nesbitt Burns, the bank's investment dealing arm, failed in September 2007 to maintain risk adjusted capital at the level greater than zero required by the regulator, and was deficient in the sum of C$207 million ($175 million).

"This was a matter pertaining to an inadvertent breach of IIROC's repatriation of capital rules, which resulted in a risk adjusted capital deficiency at BMO NB in September 2007," bank spokesman Ralph Marranca said in an e-mailed statement.

"At no time did this represent a risk to the health and strength of BMO NB and no client accounts were affected in any way as a result of the incident."

The size of the proposed settlement was not disclosed.

IIROC reached a similar agreement with Credit Suisse Securities (Canada) Inc in February that resulted in a C$25,000 fine.

IIROC is the national self-regulatory organization that oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.

($1=$1.18 Canadian) (Reporting by Pav Jordan; editing by Jeffrey Hodgson)