Transamerica Life Insurance Company of Canada fired three employees and suspended 17 in a trading scandal involving one of the firm's offshore funds based in Luxembourg, said Barry Francis, a spokesperson for the company.

Fifty-six of the Toronto-based company's employees had $4.7 million invested in the NN Information Technology Fund, Francis said. They were discovered, through an internal investigation, to be timing the fund to earn total profits ranging from $2 million to $3 million, Francis said.

A flaw in the fund's pricing mechanism allowed the employees to take advantage of the difference between market openings in Europe and North America, Francis said.

"It was like shooting fish in a barrel. It was like having tomorrow's news today," Francis said. "They were allowed to make almost guaranteed returns. If [the market] was going down, they would sell every time."

Most of the fund's holdings were technology stocks traded on the Nasdaq. However, the fund was valued at 10 a.m. Eastern time to coincide with the closing of the market in Luxembourg. The employees were therefore able to determine whether that value would rise or fall based on the Nasdaq's movement the previous day, Francis said.

While the employees were not acting illegally, they were in violation of company policy, Francis said. All of the 56 employees' accounts have been frozen and an ongoing investigation may result in more terminations and suspensions, he said. Federal and provincial authorities are also looking into the matter, he said.

Shareholders in the fund are estimated to have lost between $2 million and $3 million as a result of the scandal, the company announced. The company will make restitution to all shareholders that were affected by the matter, Francis said. The firm has hired the accounting firm Deloitte and Touche of New York to conduct an audit to determine the exact amount of shareholder losses, he said.

Transamerica acquired the NN Information Technology Fund when it purchased NN Life from ING Canada, both based in Toronto, Francis said.

The NN Information Technology Fund is a segregated fund which is similar to a mutual fund but includes an insurance component that guarantees 80 percent of the investor's initial investment, he said.

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